Mixed Market Structure and R &D: A Differential Game Approach

Akihiko Yanase () and Ngo Long
Additional contact information
Akihiko Yanase: Nagoya University

Dynamic Games and Applications, 2024, vol. 14, issue 1, No 7, 97-132

Abstract: Abstract We consider a dynamic model of an industry consisting of a few large firms, which can manipulate the market outcome, and a mass of small enterprises, each of which has a negligible impact on the market. The production costs of the respective firms depend on the stock of knowledge capital, which accumulates over time through research and development (R &D) investment made by large firms. The model is a variant of the differential game of voluntary provision of public goods, but in contrast to previous studies, we focus on the interaction between market competition and dynamic game outcomes. We derive both open-loop and Markov-perfect Nash equilibria. There exists a unique open-loop Nash equilibrium. By contrast, depending on the parameters of the model, there can be two linear Markov-perfect Nash equilibria. We also examine the short- and long-run effects of a change in the number of large firms. An increase in the number of large firms unambiguously harms both types of firms in the short run but may benefit them in the long run. In the open-loop Nash equilibrium, the relationship between the number of large firms and the steady-state stock of knowledge capital is inverted-U shaped. Concerning the Markov-perfect Nash equilibria, the effect of increased competition from large firms depends on the specific feedback strategy chosen in equilibrium.

Keywords: Dynamic voluntary provision of public goods; Cost-reducing R and D; Mixed market competition; Multiple equilibria; Competition and innovation (search for similar items in EconPapers)
JEL-codes: C61 C72 C73 D43 H41 L13 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s13235-023-00504-z Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:dyngam:v:14:y:2024:i:1:d:10.1007_s13235-023-00504-z

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/13235

DOI: 10.1007/s13235-023-00504-z

Access Statistics for this article

Dynamic Games and Applications is currently edited by Georges Zaccour

More articles in Dynamic Games and Applications from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().