Can Rivalry in R&D Be Harmful to Duopolists under Supply Function Competition?

Saglam, Ismail (2022): Can Rivalry in R&D Be Harmful to Duopolists under Supply Function Competition?

Abstract

We consider a duopoly with cost asymmetry and demand uncertainty and show that rivalry in (process) R&D can be ex-ante harmful to both firms if they produce under supply function competition. However, if the firms produce under Cournot competition, only the efficient firm ex-ante suffers from R&D rivalry. Moreover, this rivalry always narrows down the efficiency gap between the duopolists, and more visibly so under Cournot competition. On the other hand, we find that consumers always ex-ante benefit from R&D rivalry, both under Cournot and supply function competitions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Duopoly; process R&D; supply function competition; Cournot competition.
• Subjects: D - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market Imperfection; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O30 - General

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