Price vs Quantity in a Duopoly with Technological Spillovers: A Welfare Re-Appraisal
We analyse the problem of the choice of the market variable in a model where firms activate R&D investments for process innovation. We establish that (i) firms always choose the Cournot behaviour; and (ii) there exists a set of the relevant parameters where a benevolent social planner prefers quantity setting to price setting. This happens when the marginal cost of R&D activities is relatively low while technological externalities are relatively high. In this situation, the conflict between social and private preferences over the type of market behaviour disappears.
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- Flavio Delbono & Vincenzo Denicolo, 1991.
"Incentives to Innovate in a Cournot Oligopoly,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 106(3), pages 951-961.
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- 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.
- Barbara J. Spencer & James A. Brander, 1982. "Strategic Commitment with R&D: The Symmetric Case," Working Papers 516, Queen's University, Department of Economics.
- Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 395-410.