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Symmetric Cournot Oligopoly and Economic Welfare: A Synthesis

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  • Okuno-Fujiwara, Masahiro
  • Suzumura, Kotaro

Abstract

Recently, Mankiw-Whinston (1986) and Suzumura-Kiyono (1987) have shown that socially excessive firm entry occurs in unregulated oligopoly. This paper extends this "excess entry" results by looking into strategic aspects of cost-reducing R&D investment that creates incentives towards socially excessive investments. In the first stage, firms decide whether or not to enter the market. In the second stage, firms make a commitment to cost-reducing R&D investment. In the third stage, firms compete in output quantities. It is shown that the excess entry holds even in the presence of strategic commitments.

Suggested Citation

  • Okuno-Fujiwara, Masahiro & Suzumura, Kotaro, 1993. "Symmetric Cournot Oligopoly and Economic Welfare: A Synthesis," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(1), pages 43-59, January.
    • Handle: RePEc:spr:joecth:v:3:y:1993:i:1:p:43-59
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