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An Analysis of Post-Product Development Market Research and its Effects on Firms and Consumers

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  • Randal Reed

Abstract

This paper examines a model of post-product development market research that allows firms to improve their information about demand curves. The process does not allow perfect information at finite expenditure levels. The model examines oligopolistic behavior and social welfare in the heterogeneous product world. The basic results derived are that investment of this type bears no externality to other firms in the market and a negative externality to consumers in the market from the improved information of the firm. These results are robust across several extensions which are presented in the paper. Conclusions for policy toward firms engaging in post-product market research are drawn for several different international market scenarios.

Suggested Citation

  • Randal Reed, 1992. "An Analysis of Post-Product Development Market Research and its Effects on Firms and Consumers," Discussion Papers 996, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  • Handle: RePEc:nwu:cmsems:996
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    1. Vives, Xavier, 1984. "Duopoly information equilibrium: Cournot and bertrand," Journal of Economic Theory, Elsevier, vol. 34(1), pages 71-94, October.
    2. Li, Lode & McKelvey, Richard D. & Page, Talbot, 1987. "Optimal research for cournot oligopolists," Journal of Economic Theory, Elsevier, vol. 42(1), pages 140-166, June.
    3. Gal-Or, Esther, 1985. "Information Sharing in Oligopoly," Econometrica, Econometric Society, vol. 53(2), pages 329-343, March.
    4. Kyle Bagwell & Robert W. Staiger, 1990. "Risky R&D in Oligopolistic Product Markets," Discussion Papers 872, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. Carl Shapiro, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Oxford University Press, vol. 53(3), pages 433-446.
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