 R&D investments and location choices with three firmsWen-Chung Guo and Fu-Chuan Lai International Review of Economics & Finance, 2024, vol. 92, issue C, 1448-1459 Abstract: This study examines a three-stage game involving three firms that make sequential decisions regarding their locations, participate in quality-enhancing research and development (R&D) with spillover effects, and establish pricing strategies. In contrast to the potential for maximal differentiation observed in duopolies, adding a third firm consistently results in only moderate locational differentiation because of a diminished need to circumvent competition. Interestingly, the firm positioned in the middle incurs the highest R&D costs despite potential free-riding by competitors, driven by the strategic need to offset its competitive disadvantage. The presence of R&D spillover encourages firms to choose closer proximity, enhancing consumer surplus and social welfare by reducing prices and transportation costs, even as R&D investment and product quality may decline. The dynamics and implications of expanding the model to include a fourth firm are also explored, further enriching the understanding of competitive strategies in multi-firm markets. Keywords: Quality-improving R&D; Spillover; Locations; Three firms; Vertical differentiation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:92:y:2024:i:c:p:1448-1459 DOI: 10.1016/j.iref.2024.02.054 Access Statistics for this article International Review of Economics & Finance is currently edited by H. Beladi and C. Chen More articles in International Review of Economics & Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.