Bertrand-Cournot profit reversal under non-commitment process innovation

Zhang, Qidi; Wang, Leonard F.S.; Mukherjee, Arijit

Abstract

We provide a new reason for Bertrand-Cournot profit reversal. In a symmetric oligopoly, we show that firms get higher profits under Bertrand competition compared to Cournot competition under non-commitment process innovation if the products are sufficiently differentiated and there is positive knowledge spillover. As the number of firms increases, the degree of product differentiation over which the profits are higher under Bertrand competition can increase. Higher outputs under Bertrand competition compared to Cournot competition generate higher R&D investments under the former than the latter, which is responsible for our result.

Citation

Zhang, Q., Wang, L. F., & Mukherjee, A. (2024). Bertrand-Cournot profit reversal under non-commitment process innovation. Manchester School, 92(4), 371-382. https://doi.org/10.1111/manc.12471

• Journal Article Type: Article
• Acceptance Date: Jan 22, 2024
• Online Publication Date: Feb 7, 2024
• Publication Date: 2024-07
• Deposit Date: Jan 23, 2024
• Publicly Available Date: Feb 12, 2024
• Journal: Manchester School
• Print ISSN: 1463-6786
• Electronic ISSN: 1467-9957
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 92
• Issue: 4
• Pages: 371-382
• DOI: https://doi.org/10.1111/manc.12471
• Keywords: Cournot competition, process innovation, Bertrand competition, non‐commitment R&D
• Public URL: https://nottingham-repository.worktribe.com/output/30112907
• Publisher URL: https://onlinelibrary.wiley.com/doi/10.1111/manc.12471