- Dynamic efficiency of Cournot and Bertrand competition with cooperative R&D
- 7th International Industrial Organization conference sessions
- Northeastern University
- Document type
- Working paper
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
We consider the efficiency of Cournot and Bertrand competition when firms cooperatively conduct cost-reducing R&D.We decompose the combinedprofits externality into three components: a strategic component, a size component, and a spillover component. The latter bears an opposite sign across competition types. Hence, under Bertrand competition the minimum spillover above which cooperative R&D exceeds noncooperative R&D is higher than under Cournot competition. Also, the traditional difference in R&D investment incentives between Cournot and Bertrand competition is exemplified if firms conduct R&D cooperatively. The Cournot-Nash price can then be below the Bertrand-Nash price, especially if spillovers are strong.
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