Cournot vs. Bertrand in mixed markets with R&D

Basak, Debasmita; Wang, Leonard F.S.

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.

Citation

Basak, D., & Wang, L. F. (2019). Cournot vs. Bertrand in mixed markets with R&D. North American Journal of Economics and Finance, 48, 265-271. https://doi.org/10.1016/j.najef.2019.02.006

• 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.
• Contract Date: Mar 5, 2019