Product and Process R&D under Asymmetric Demands

Yi-Jie Wang, Kung-Cheng Andy Wang, Wen-Jung Liang and Bo-Yi Lee

Journal of Institutional and Theoretical Economics (JITE), 2019, vol. 175, issue 3, 537-557

Abstract: We develop a two-market model with asymmetric demands to examine the optimal product and process R&D under Bertrand and Cournot competition. We show that when the big market is sufficiently large and the cost parameter of product R&D is small or when the market is symmetric and the marginal disutility rate is high, the Cournot aggregate product R&D is greater than that under Bertrand competition. Next, when the big market is not sufficiently large and the cost parameter of product R&D is small, the Bertrand aggregate process R&D is greater than that under Cournot competition if the marginal disutility rate is low.

Keywords: product R&D; process R&D; two-market model; Bertrand competition; Cournot competition (search for similar items in EconPapers)
JEL-codes: L1 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1628/jite-2018-0015

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