Sequencing R&D decisions with a consumer-friendly firm and spillovers

Mariel Leal (), Arturo Garcia and Sang-Ho Lee ()
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Mariel Leal: Tecnologico de Monterrey

The Japanese Economic Review, 2021, vol. 72, issue 2, No 5, 243-260

Abstract: Abstract This study considers a duopoly model in which both a consumer-friendly (CF) firm and a for-profit (FP) firm undertake cost-reducing R&D investments in an endogenous R&D timing game and then play Cournot output competition. When the CF firm chooses its profit-oriented consumer-friendliness, we show that the consumer-friendliness is non-monotone in spillovers under both simultaneous move and sequential move with FP firm’s leadership while it is decreasing under sequential move with CF firm’s leadership. We also show that a simultaneous-move outcome is a unique equilibrium when the spillovers are low and the CF firm invests higher R&D and obtains higher profits. When the spillovers are not low, two sequential-move outcomes appear and the CF firm might obtain lower profits with higher spillovers under the CF firm leadership.

Keywords: Simultaneous R&D decisions; Sequential R&D decisions; Consumer-friendly firm; R&D spillovers (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s42973-019-00028-5

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