R&D Incentives in Vertically Related Markets

Ahmad Saboori () and Georg Götz
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Ahmad Saboori: University of Giessen

MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: This paper focuses on incentives to invest in research and development (R&D) in vertically related markets. In a bilateral duopoly setup, we consider how process R&D incentives of the firms in both upstream and downstream market depend on the intensity of simultaneous interbrand and intrabrand competition. Among the results: both interbrand and intrabrand competition have twofold effects on R&D incentives. Existence of a vertically related market with imperfect competition lowers both the incentives to invest in process R&D and the competitive advantage through the R&D investment. We will show how the impact of a firm's R&D investments in either market on consumer surplus as well as on the profits of all firms in both markets depends on exogenous parameters.

Keywords: research and development; vertical relations; bilateral oligopoly; product differentiation; process innovation; interbrand and intrabrand competition (search for similar items in EconPapers)
JEL-codes: D43 L13 O30 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2013
New Economics Papers: this item is included in nep-com, nep-cse, nep-ind, nep-ino and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:201307

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