Entry, Profit and Welfare under Asymmetric R&D Costs

Arijit Mukherjee and Achintya Ray ()

Manchester School, 2014, vol. 82, issue 3, 284-295

Abstract: type="main">

We show the effects of entry of a new firm on the profits and welfare when the firms share the same initial cost of production but differ in terms of the costs of undertaking R&D. Considering a Cournot oligopoly model with innovation and linear demand and production costs, we show that entry reduces the profits of the incumbent firms and it can be welfare reducing.

Date: 2014
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