Endogenous choice of capacity and product innovation in a differential duopoly
We model a symmetric duopoly where firms choose whether to be quantity setters or price setters by deciding the optimal capacity; undertake R&D activity to determine the degree of differentiation; and finally compete in the market. Two games are proposed, where investment decisions follow different sequences. We assess price and quantity decisions, finding a set of equilibria where the choice of the market variable is affected by both technological commitments. As a result, the acquired wisdom that quantity setting is a dominant strategy for firms, while price setting is a dominant strategy from a social standpoint, may not be confirmed.
|Date of creation:||May 1998|
|Contact details of provider:|| Postal: Piazza Scaravilli, 2, and Strada Maggiore, 45, 40125 Bologna|
Phone: +39 051 209 8019 and 2600
Fax: +39 051 209 8040 and 2664
Web page: http://www.dse.unibo.it
More information through EDIRC
References listed on IDEAS
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.:
- Levitan, Richard & Shubik, Martin, 1972.
"Price Duopoly and Capacity Constraints,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 13(1), pages 111-22, February.
- Bester, H. & Petrakis, E., 1991.
"The Incentives for Cost Reduction in a Differentiated Industry,"
1991-36, Tilburg University, Center for Economic Research.
- Bester, Helmut & Petrakis, Emmanuel, 1993. "The incentives for cost reduction in a differentiated industry," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 519-534.
- Bester, H. & Petrakis, E., 1991. "The Incentives for Cost Reduction in a Differentiated Industry," Papers 9136, Tilburg - Center for Economic Research.
- James A. Brander & Barbara J. Spencer, 1983.
"Strategic Commitment with R&D: The Symmetric Case,"
Bell Journal of Economics,
The RAND Corporation, vol. 14(1), pages 225-235, Spring.
- Osborne, Martin J. & Pitchik, Carolyn, 1986.
"Price competition in a capacity-constrained duopoly,"
Journal of Economic Theory,
Elsevier, vol. 38(2), pages 238-260, April.
- Osborne, Martin J. & Pitchik, Carolyn, 1983. "Price Competition in a Capacity-Constrained Duopoly," Working Papers 83-08, C.V. Starr Center for Applied Economics, New York University.
- Dan Kovenock & Raymond J. Deneckere, 1996. "Bertrand-Edgeworth duopoly with unit cost asymmetry (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 8(1), pages 1-25.
- F. Delbono & V. Denicolo, 1988.
"Incentives to Innovate in a Cournot Oligopoly,"
44, Dipartimento Scienze Economiche, Universita' di Bologna.
When requesting a correction, please mention this item's handle: RePEc:bol:bodewp:320. 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: (Dipartimento Scienze Economiche, Universita' di Bologna)
If references are entirely missing, you can add them using this form.