Cournot and Bertrand Competition in a Differentiated Duopoly with Endogenous Technology Adoption

Hongkun Ma, X. Wang () and Chenhang Zeng
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Hongkun Ma: School of Economics, Shandong University

Annals of Economics and Finance, 2015, vol. 16, issue 1, 231-253

Abstract: We study firms' endogenous technology adoption in a two-stage differenti- ated duopoly game. Firms choose technologies from a continuous technology set in stage one, and engage in either Cournot or Bertrand competition in stage two. If the technology set is sufficiently convex and the degree of product dif- ferentiation is sufficiently high, we find that (i) Bertrand competition leads to more interior technology choices than Cournot competition, and (ii) Cournot competition induces a greater incentive to innovate for both firms. Further- more, welfare analysis shows that Bertrand competition always yields higher consumer surplus and social welfare than Cournot competition although the marginal cost of production is higher.

Keywords: Technology adoption; Differentiated duopoly; Cournot competition; Bertrand competition (search for similar items in EconPapers)
JEL-codes: D2 D8 L2 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (5)

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