Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2007-12-17
Number: 07-097/1
Author-Name: Jeroen Hinloopen
Author-Email: J.Hinloopen@uva.nl
Author-Workplace-Name: Universiteit van Amsterdam, and Katholieke Universiteit Leuven
Author-Name: Jan Vandekerckhove
Author-Email: Jan.Vanderkerckhove@econ.kuleuven.be
Author-Workplace-Name: Kath. Universiteit Leuven
Title: Dynamic Efficiency of Product Market Competition
Abstract: We consider the efficiency of Cournot and Bertrand equilibria in a duopoly with substitutable goods where firms invest in process R&D. Under Cournot competition firms always invest more in R&D than under Bertrand competition. More importantly, Cournot competition yields lower prices than Bertrand competition when the R&D production process is efficient, when spillovers are substantial, and when goods are not too differentiated. The range of cases for which total surplus under Cournot competition exceeds that under Bertrand competition is even larger as competition over quantities always yields the largest producers' surplus.
Classification-JEL: L13
Keywords: Bertrand competition; Cournot competition; process R&D; efficiency
File-Url: https://papers.tinbergen.nl/07097.pdf
File-Format: application/pdf
File-Size: 254018 bytes
Handle: RePEc:tin:wpaper:20070097