Market Competition, R&D and Firm Profits in Asymmetric Oligopoly

Junichiro Ishida, Toshihiro Matsumura and Noriaki Matsushima

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: 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.

Date: 2010-05
New Economics Papers: this item is included in nep-bec, nep-com, nep-cse, nep-ino and nep-tid
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Citations: View citations in EconPapers (15)

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Journal Article: MARKET COMPETITION, R&D AND FIRM PROFITS IN ASYMMETRIC OLIGOPOLY (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0777

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