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R&D in transport and comunication in a Cournot duopoly

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  • L. Lambertini
  • A. Mantovani
  • G. Rossini

Abstract

We analyse R&D activity in transport and communication technology (TCRD), in a Cournot duopoly. Transport and communication costs are of the iceberg type, i.e., using up some portion of the product along its path to the final buyer. Firms invest in TCRD to increase the net amount of the product that reaches consumers. A variety of equilibria arise as a result of the different levels of TCRD efficiency. If TCRD’s productivity is high, the game is a prisoner’s dilemma where both firms invest in TCRD. As the e¢ciency of the TCRD progressively fades we come across first a chicken game and, then, at lower e¢ciency, a game with an equilibrium in dominant strategies where the profits are at the highest. Social welfare is maximised by market strategies only when TCRD is very efficient.

Suggested Citation

  • L. Lambertini & A. Mantovani & G. Rossini, 2001. "R&D in transport and comunication in a Cournot duopoly," Working Papers 401, Dipartimento Scienze Economiche, Universita' di Bologna.
  • Handle: RePEc:bol:bodewp:401
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    References listed on IDEAS

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    1. Lambertini, Luca & Poddar, Sougata & Sasaki, Dan, 1998. "Standardization and the stability of collusion," Economics Letters, Elsevier, vol. 58(3), pages 303-310, March.
    2. 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.
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    Cited by:

    1. Colombo, Luca & Lambertini, Luca & Mantovani, Andrea, 2009. "Endogenous transportation technology in a Cournot differential game with intraindustry trade," Japan and the World Economy, Elsevier, vol. 21(2), pages 133-139, March.
    2. A. Mantovani, 2001. "Transportation Technologyin a Duopoly Model of International Trade," Working Papers 417, Dipartimento Scienze Economiche, Universita' di Bologna.
    3. Lambertini, Luca & Rossini, Gianpaolo, 2006. "Investment in transport and communication technology in a Cournot duopoly with trade," Japan and the World Economy, Elsevier, vol. 18(2), pages 221-229, March.
    4. L. Colombo & L. Lambertini & A. Mantovani, 2003. "A Differential Game with Investment in Transport and Communication R&D," Working Papers 466, Dipartimento Scienze Economiche, Universita' di Bologna.
    5. A. Mantovani, 2001. "Product Innovation and Transportation Technology in a Cournot Duopoly," Working Papers 416, Dipartimento Scienze Economiche, Universita' di Bologna.
    6. Gianpaolo Rossini & Paolo Zanghieri, 2008. "What Drives Price Differentials of Consumables in Europe? Size? Affluence? Or Both?," Open Economies Review, Springer, vol. 19(1), pages 121-134, February.
    7. A. Mantovani & G. Rossini & P. Zanghieri, 2002. "Country Size and the Price of Tradeables: is There Any Relationship Beyond Wishful Thinking?," Working Papers 443, Dipartimento Scienze Economiche, Universita' di Bologna.

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