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Symmetric Cournot Oligopoly and Economic Welfare: A Synthesis

Masahiro Okuno-Fujiwara () and Kotaro Suzumura ()

Economic Theory, 1993, vol. 3, issue 1, 43-59

Abstract: Recently, Mankiw-Whinston (1986) and Suzumura-Kiyono (1987) have shown that socially excessive firm entry occurs in unregulated oligopoly. This paper extends this "excess entry" results by looking into strategic aspects of cost-reducing R&D investment that creates incentives towards socially excessive investments. In the first stage, firms decide whether or not to enter the market. In the second stage, firms make a commitment to cost-reducing R&D investment. In the third stage, firms compete in output quantities. It is shown that the excess entry holds even in the presence of strategic commitments.

Date: 1993
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Working Paper: Symmetric Cournot Oligopoly and Economic Welfare: A Synthesis (1991)
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