PRIVATE AND SOCIAL INCENTIVES TOWARDS INVESTMENT IN PRODUCT DIFFERENTIATION

Roberto Cellini and Luca Lambertini ()

International Game Theory Review (IGTR), 2004, vol. 06, issue 04, 493-508

Abstract: We consider a dynamic oligopoly where firms invest to increase product differentiation and an externality effect operates in the R&D activity. We compare the steady state solutions under alternative decision rules, namely, the open-loop and the closed-loop Nash equilibrium. Significant differences emerge, concerning the effect of the number of firms upon the optimal degree of product differentiation. We also compare the private optima with the social optimum, and derive implications concerning the social desirability of different decision rules.

Keywords: Differential games; research and development; product differentiation; spillovers; JEL Classification Code: C73; JEL Classification Code: L13; JEL Classification Code: O31 (search for similar items in EconPapers)
JEL-codes: B4 C0 C6 C7 D5 D7 M2 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (7)

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Working Paper: Private and Social Incentives Towards Investment in Product Differentiation (2002)
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DOI: 10.1142/S0219198904000320

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