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R&D Incentives in Vertically Related Markets

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  • Ahmad Reza Saboori Memar

    () (University of Giessen)

  • Georg Götz

    () (University of Applied Science)

Abstract

This paper focuses on incentives to invest in research and development (R&D) in vertically related markets. In a bilateral duopoly setup, we consider how process R&D incentives of the firms in both upstream and downstream market depend on the intensity of simultaneous interbrand and intrabrand competition. Among the results: both interbrand and intrabrand competition have twofold effects on R&D incentives. Existence of a vertically related market with imperfect competition lowers both the incentives to invest in process R&D and the competitive advantage through the R&D investment. We will show how the impact of a firm's R&D investments in either market on consumer surplus as well as on the profits of all firms in both markets depends on exogenous parameters.

Suggested Citation

  • Ahmad Reza Saboori Memar & Georg Götz, 2013. "R&D Incentives in Vertically Related Markets," MAGKS Papers on Economics 201307, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  • Handle: RePEc:mar:magkse:201307
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    File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/07-2013_memar.pdf
    File Function: First 201307
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    research and development; vertical relations; bilateral oligopoly; product differentiation; process innovation; interbrand and intrabrand competition;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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