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An analysis of cost-reduction innovation under capacity constrained inputs

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  • Pu-yan Nie
  • Chan Wang

Abstract

This article focuses on duopoly cost-reduction innovation with the upstream input subjected to capacity constraints. By two-stage duopoly model, some interesting conclusions are achieved. Firstly, the higher efficiency firms invest the less in cost-reduction innovation and require the fewer resources under capacity constraints. Therefore, lower efficiency firms launch the lower price strategies. To our surprise, lower efficiency firms seem to be more aggressive both in innovation and in outputs. Secondly, symmetric firms’ innovation decreases with the total resources while asymmetric firms’ innovation increases with the total capacity. Finally, innovation gap decreases with both the total capacity and the degree of substitutability.

Suggested Citation

  • Pu-yan Nie & Chan Wang, 2019. "An analysis of cost-reduction innovation under capacity constrained inputs," Applied Economics, Taylor & Francis Journals, vol. 51(6), pages 564-576, February.
    • Handle: RePEc:taf:applec:v:51:y:2019:i:6:p:564-576
    DOI: 10.1080/00036846.2018.1497850
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    Citations

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    Cited by:

    1. Nie, Pu-yan & Chen, Zi-rui & Wang, Chan, 2021. "Intellectual property pricing under asymmetric duopoly," Journal of Retailing and Consumer Services, Elsevier, vol. 58(C).
    2. Nie, Pu-yan & Wang, Chan & Wen, Hong-xing, 2021. "Horizontal mergers under uniform resource constraints," Journal of Retailing and Consumer Services, Elsevier, vol. 63(C).
    3. Dong-Xiao Yang & Lei Yang & Xiao-Ling Chen & Chan Wang & Pu-Yan Nie, 2023. "Research on credit pricing mechanism in dual-credit policy: is the government in charge or is the market in charge?," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(2), pages 1561-1581, February.
    4. You-hua Chen & Pu-yan Nie & Chan Wang, 2021. "Effects of carbon tax on environment under duopoly," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(9), pages 13490-13507, September.
    5. Arturo Garcia & Mariel Leal & Sang‐Ho Lee, 2020. "Cooperation with a multiproduct corporation in a strategic managerial delegation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(1), pages 3-9, January.
    6. Chen, You-hua & Chen, Liu-man & Mishra, Ashok K., 2021. "Information, Capacity Constraints and Quality on Firms Competition," 2021 ASAE 10th International Conference (Virtual), January 11-13, Beijing, China 329427, Asian Society of Agricultural Economists (ASAE).
    7. Tang, Tingfeng, 2020. "Hedge fund activism and corporate innovation," Economic Modelling, Elsevier, vol. 85(C), pages 335-348.
    8. Nejla Ould Daoud Ellili & Haitham Nobanee, 2023. "Impact of economic, environmental, and corporate social responsibility reporting on financial performance of UAE banks," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(5), pages 3967-3983, May.

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