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Cournot vs. Bertrand in mixed markets with R&D

Basak, Debasmita; Wang, Leonard F.S.

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Authors

Leonard F.S. Wang



Abstract

We investigate the question of endogenous choice of price and quantity competition in a mixed duopoly where both welfare maximising public firm and profit maximising private firm invest in cost-reducing R&D. In contrary to the conventional belief that Cournot competition arises in equilibrium, we find that price competition constitutes equilibrium. We further argue that the results that Cournot profit is strictly higher than Bertrand in standard oligopoly and that the Bertrand profit is strictly higher than Cournot in mixed oligopoly, both hold when the public and private firm engage in R&D. We also find that the public firm is more innovative than the private firm.

Journal Article Type Article
Acceptance Date Feb 14, 2019
Online Publication Date Feb 22, 2019
Publication Date Apr 1, 2019
Deposit Date Mar 5, 2019
Publicly Available Date Feb 23, 2020
Journal The North American Journal of Economics and Finance
Print ISSN 1062-9408
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 48
Pages 265-271
DOI https://doi.org/10.1016/j.najef.2019.02.006
Keywords Bertrand; Cournot; Differentiated products, Mixed markets, Process innovation JEL Classification: D43; H42; L13; O31
Public URL https://nottingham-repository.worktribe.com/output/1607737
Publisher URL https://www.sciencedirect.com/science/article/pii/S1062940818304972
Additional Information This article is maintained by: Elsevier; Article Title: Cournot vs. Bertrand in mixed markets with R&D; Journal Title: The North American Journal of Economics and Finance; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.najef.2019.02.006; Content Type: article; Copyright: © 2019 Elsevier Inc. All rights reserved.

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