Market Competition, R&D and Firm Profits in Asymmetric Oligopoly
We investigate a Cournot model with strategic R&D investments wherein efficient low-cost firms compete against less efficient high-cost firms. We find that an increase in the number of high-cost firms can stimulate R&D by the low-cost firms, while it always reduces R&D by the high-cost firms. More importantly, this force can be strong enough to compensate for the loss that arises from more intense market competition: the low-cost firms' profits may indeed increase with the number of high-cost firms. An implication of this result is far-reaching, as it gives low-cost firms an incentive to help, rather than harm, high-cost competitors. We relate this implication to a practice known as open knowledge disclosure, especially Ford's strategy of disclosing its know-how publicly and extensively at the beginning of the 20th century.
Year of publication: |
2010-05
|
---|---|
Authors: | Ishida, Junichiro ; Matsumura, Toshihiro ; Matsushima, Noriaki |
Institutions: | Institute of Social and Economic Research (ISER), Osaka University |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Domestic Competition and Foreign Direct Investment in Unionized Oligopoly
Ishida, Junichiro, (2008)
-
Should firms employ personalized pricing?
Matsumura, Toshihiro, (2013)
-
Regional restriction, strategic delegation, and welfare
Matsumura, Toshihiro, (2009)
- More ...