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Network externalities and process R&D: A Cournot–Bertrand comparison

Mili Naskar and Rupayan Pal ()

Mathematical Social Sciences, 2020, vol. 103, issue C, 51-58

Abstract: This paper examines the implication of the nature of competition in a market with network externalities on strategic investment in process R&D by firms. It shows that network externalities have a larger positive effect on process R&D under Bertrand competition than that under Cournot competition. If network externalities are sufficiently strong, regardless of the degree of product differentiation, Bertrand firms have a stronger incentive for process R&D than Cournot firms. Further, Bertrand R&D can be higher than Cournot R&D even in the presence of weak network externalities. These results hold true regardless of whether networks are incompatible or imperfectly compatible.

Keywords: Process R&D; Network externalities; Cournot; Bertrand; Product differentiation; Network compatibility (search for similar items in EconPapers)
Date: 2020
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Working Paper: Network Externalities And Process R&D: A Cournot-Bertrand Comparison (2016) Downloads
Working Paper: Network externalities and process R&D: A Cournot-Bertrand comparison (2016) Downloads
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DOI: 10.1016/j.mathsocsci.2019.11.006

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