Endogenous transport price, R&D spillovers, and trade

Takauchi, Kazuhiro and Mizuno, Tomomichi (2020): Endogenous transport price, R&D spillovers, and trade.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Transport price; R&D spillovers; Price competition; Monopsony power
• Subjects: F - International Economics > F1 - Trade > F12 - Models of Trade with Imperfect Competition and Scale Economies ; Fragmentation; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R4 - Transportation Economics > R40 - General

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