Comparing Cournot and Bertrand Equilibria in a Differentiated Duopoly with Product R&D
This paper compares Bertrand and Cournot equilibria in a differentiated duopoly with substitute goods and product R&D. I find that R&D expenditure, prices and firms� net profits are always higher under quantity competition than under price competition. Furthermore, output, consumer surplus and total welfare are higher in the Bertrand equilibrium than in the Cournot equilibrium if either R&D spillovers are weak or products are sufficiently differentiated. If R&D spillovers are strong and products are not too differentiated, then output, consumer surplus and total welfare are lower in the Bertrand case than in the Cournot case. Thus a key finding of the paper is that there are circumstances where quantity competition can be more beneficial than price competition both for consumers and for firms.
|Date of creation:||10 May 2002|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.essex.ac.uk/economics/
More information through EDIRC
|Order Information:|| Postal: Discussion Papers Administrator, Department of Economics, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, U.K.|
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.:
- S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
- Qiu, Larry D., 1997. "On the Dynamic Efficiency of Bertrand and Cournot Equilibria," Journal of Economic Theory, Elsevier, vol. 75(1), pages 213-229, July.
- Hackner, Jonas, 2000.
"A Note on Price and Quantity Competition in Differentiated Oligopolies,"
Journal of Economic Theory,
Elsevier, vol. 93(2), pages 233-239, August.
- Häckner, Jonas, 1999. "A Note on Price and Quantity Competition in Differentiated Oligopolies," Research Papers in Economics 1999:9, Stockholm University, Department of Economics.
- Rabah Amir, 1998.
"Modelling Imperfectly Appropriable R&D via Spillovers,"
CIE Discussion Papers
1998-07, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- Amir, Rabah, 2000. "Modelling imperfectly appropriable R&D via spillovers," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1013-1032, October.
- 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.
- Bester, H. & Petrakis, E., 1991. "The Incentives for Cost Reduction in a Differentiated Industry," Discussion Paper 1991-36, Tilburg University, Center for Economic Research.
- 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.
- Symeonidis, George, 1999. "Cartel stability in advertising-intensive and R&D-intensive industries," Economics Letters, Elsevier, vol. 62(1), pages 121-129, January.
When requesting a correction, please mention this item's handle: RePEc:esx:essedp:539. 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: (Essex Economics Web Manager)
If references are entirely missing, you can add them using this form.