Strategic R&D And Network Compatibility
We analyse the effects of network externalities in strategic R&D competition. We present a model of two firms competing with R&D investments and prices in a differentiated consumer market. Buyers form firm-specific networks which can be compatible. A high degree of compatibility and large spillovers moderate price competition due to weak strategic value of firm-specific networks and R&D investments, respectively. Asymmetry in product qualities brings out network effects that cancel out in conventional symmetric settings. The lower quality firm increases R&D and decreases its price as spillovers or network compatibility is increased. This happens when R&D and firm-specific network size have high strategic value.
Volume (Year): 15 (2006)
Issue (Month): 8 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/GEIN20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/GEIN20|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cristiano Antonelli, 2003.
"Knowledge Complementarity and Fungeability: Implications for Regional Strategy,"
Taylor & Francis Journals, vol. 37(6-7), pages 595-606.
- Antonelli, Cristiano, 2003. "Knowledge Complementarity and Fungeability: Implications for Regional Strategy," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200302, University of Turin.
- Antonelli, Cristiano, 2003. "The digital divide: understanding the economics of new information and communication technology in the global economy," Information Economics and Policy, Elsevier, vol. 15(2), pages 173-199, June.
- Dessein, Wouter, 2003.
" Network Competition in Nonlinear Pricing,"
RAND Journal of Economics,
The RAND Corporation, vol. 34(4), pages 593-611, Winter.
- Jeremy I. Bulow & John Geanakoplos & Paul D. Klemperer, 1983. "Multimarket Oligopoly," Cowles Foundation Discussion Papers 674, Cowles Foundation for Research in Economics, Yale University.
- Suzumura, Kotaro, 1993. "Cooperative and Non-Cooperative R&D in an Oligopoly with Spillovers : Strategic Substitutes versus Strategic Complements," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 34(1), pages 1-11, June.
- Stanley M. Besen & Joseph Farrell, 1994. "Choosing How to Compete: Strategies and Tactics in Standardization," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 117-131, Spring.
- Cremer, Jacques & Rey, Patrick & Tirole, Jean, 2000.
"Connectivity in the Commercial Internet,"
Journal of Industrial Economics,
Wiley Blackwell, vol. 48(4), pages 433-72, December.
- Armstrong, Mark, 1998. "Network Interconnection in Telecommunications," Economic Journal, Royal Economic Society, vol. 108(448), pages 545-64, May.
- Laffont, Jean-Jacques & Rey, Patrick & Tirole, Jean, 1997. "Competition between telecommunications operators," European Economic Review, Elsevier, vol. 41(3-5), pages 701-711, April.
- Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June.
- Beggs, Alan & Klemperer, Paul, 1990.
"Multi-Period Competition with Switching Costs,"
CEPR Discussion Papers
436, C.E.P.R. Discussion Papers.
- Cambini, Carlo & Valletti, Tommaso, 2003.
"Investments and Network Competition,"
CEPR Discussion Papers
3829, C.E.P.R. Discussion Papers.
- David, Paul A, 1985. "Clio and the Economics of QWERTY," American Economic Review, American Economic Association, vol. 75(2), pages 332-37, May.
- Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, vol. 82(5), pages 1307-20, December.
- Bental, Benjamin & Spiegel, Menahem, 1995. "Network Competition, Product Quality, and Market Coverage in the Presence of Network Externalities," Journal of Industrial Economics, Wiley Blackwell, vol. 43(2), pages 197-208, June.
- Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-21, January.
- Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-306, December.
- Foros, Oystein, 2004. "Strategic investments with spillovers, vertical integration and foreclosure in the broadband access market," International Journal of Industrial Organization, Elsevier, vol. 22(1), pages 1-24, January.
- Armstrong, M., 1996. "Network interconnection," Discussion Paper Series In Economics And Econometrics 9625, Economics Division, School of Social Sciences, University of Southampton.
When requesting a correction, please mention this item's handle: RePEc:taf:ecinnt:v:15:y:2006:i:8:p:711-733. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.