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A Differential Game Approach to Investment in Greentech Innovation in a Duopoly with Network Externality

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  • Shengbiao Ma

    (Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai 200052, P. R. China)

  • Huiquan Li

    (��School of Business Administration, South China University of Technology, Guangzhou 510632, P. R. China)

Abstract

In this paper, we revisit a well-known differential game model to investigate the R&D activity for Greentech innovation in a duopoly market with network externality. In our study, firms carry out independent R&D or Cartel R&D for Greentech innovation which aims to reduce end-of-pipe emission and network externality effects play a role in the R&D activity via the inverse demand functions. Firms are concerned not only with their own profits, but also with the relative profits. At the steady-state equilibrium, the efforts for Greentech innovation under independent R&D are higher than that under Cartel R&D when the degree of altruism is higher than the degree of technological R&D spillover, and the network size under independent R&D is lower than that under Cartel R&D. Moreover, under a given market structure, whether profits under independent R&D are higher than under Cartel R&D depends on the initial network size, which means that at the initial moment firms can decide to undertake independent or Cartel R&D activities based on the initial network size.

Suggested Citation

  • Shengbiao Ma & Huiquan Li, 2025. "A Differential Game Approach to Investment in Greentech Innovation in a Duopoly with Network Externality," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 27(04), pages 1-23, December.
    • Handle: RePEc:wsi:igtrxx:v:27:y:2025:i:04:n:s0219198924400115
    DOI: 10.1142/S0219198924400115
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