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A Differential Game with Investment in Transport and Communication R&D

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  • L. Colombo
  • L. Lambertini
  • A. Mantovani

Abstract

We analyse R&D activity in transport and communication technology (TCRD) in a different game where firms compete, alternatively, in quantities or pricies. Transport and communications costs are of the iceberg type. Firms invest in the TCRD to increase the net amount of the product that reaches consumers. We derive subgame perfect equilibria, and show that price competetion yealds the socially optimal investment, while Cournot competition involves excess investment and lower outputs.

Suggested Citation

  • 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.
    • Handle: RePEc:bol:bodewp:466
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    References listed on IDEAS

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    1. Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
    2. Patrizio Bianchi & Luca Lambertini (ed.), 2003. "Technology, Information And Market Dynamics," Books, Edward Elgar Publishing, number 2781.
    3. 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.
    4. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
    5. Dos Santos Ferreira, Rodolphe & Thisse, Jacques-Francois, 1996. "Horizontal and vertical differentiation: The Launhardt model," International Journal of Industrial Organization, Elsevier, vol. 14(4), pages 485-506, June.
    6. 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.
    7. 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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    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.

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