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Endogenous transport price, R&D spillovers, and trade

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  • Takauchi, Kazuhiro
  • Mizuno, Tomomichi

Abstract

Efficient distribution has a considerable influence on the sales volume of firms, and thus affects the firms' research and development (R&D) activities. This paper analyzes the relationship between competition in the transport sector and R&D of firms using the transportation services. We consider a two-region reciprocal market in which firms invest in cost-reducing R&D and use carriers that engage in price competition to supply their products to the foreign market. We show that, corresponding to the degree of R&D spillover, a transport cost (or price) reduction due to an increase in the number of carriers can increase or decrease the firms' R&D investments. This result is consistent with the finding in previous studies that trade liberalization can hinder R&D. Because inefficient firms lead to high prices in the market, an increase in the number of carriers may reduce consumer surplus. We further discuss a case in which firms have monopsony power in transportation services and show that our main results are robust to the extension.

Suggested Citation

  • Takauchi, Kazuhiro & Mizuno, Tomomichi, 2020. "Endogenous transport price, R&D spillovers, and trade," MPRA Paper 102391, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:102391
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    File URL: https://mpra.ub.uni-muenchen.de/102391/1/MPRA_paper_102391.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Transport price; R&D spillovers; Price competition; Monopsony power;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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