Cournot vs. Bertrand in mixed markets with R&D

Debasmita Basak and Leonard F.S. Wang

The North American Journal of Economics and Finance, 2019, vol. 48, issue C, 265-271

Abstract: We investigate the question of endogenous choice of price and quantity competition in a mixed duopoly where both welfare maximising public firm and profit maximising private firm invest in cost-reducing R&D. In contrary to the conventional belief that Cournot competition arises in equilibrium, we find that price competition constitutes equilibrium. We further argue that the results that Cournot profit is strictly higher than Bertrand in standard oligopoly and that the Bertrand profit is strictly higher than Cournot in mixed oligopoly, both hold when the public and private firm engage in R&D. We also find that the public firm is more innovative than the private firm.

Keywords: Bertrand; Cournot; Differentiated products; Mixed markets; Process innovation (search for similar items in EconPapers)
JEL-codes: D43 H42 L13 O31 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:48:y:2019:i:c:p:265-271

DOI: 10.1016/j.najef.2019.02.006

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