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Price vs quantity in a duopoly with technological spillovers: a welfare re-appraisal

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  • LAMBERTINI, Luca
  • MANTOVANI, Andrea

Abstract

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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Suggested Citation

  • LAMBERTINI, Luca & MANTOVANI, Andrea, 2001. "Price vs quantity in a duopoly with technological spillovers: a welfare re-appraisal," LIDAM Reprints CORE 1584, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:1584
    Note: In : Keio Economic Studies , 38(2), 41-52, 2001
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    Cited by:

    1. Roberto Cellini & Luca Lambertini, 2011. "R&D Incentives Under Bertrand Competition: A Differential Game," The Japanese Economic Review, Japanese Economic Association, vol. 62(3), pages 387-400, September.

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