Network externalities and process R&D: A Cournot-Bertrand comparison

Mili Naskar and Rupayan Pal
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Mili Naskar: Indira Gandhi Institute of Development Research

Indira Gandhi Institute of Development Research, Mumbai Working Papers from Indira Gandhi Institute of Development Research, Mumbai, India

Abstract: This paper examines the implication of the nature of competition in a market with network externalities on strategic investment in process R&D by firms. It shows that network externalities have a positive effect on process R&D, regardless of the nature of product market competition; but, that effect is larger under Bertrand competition than under Cournot competition. If network externalities are sufficiently strong, regardless of the degree of product differentiation, Bertrand firms have a stronger incentive for process R&D than Cournot firms. Otherwise, if network externalities are not sufficiently strong, the higher the degree of product differentiation, the greater is the possibility of Bertrand R&D to be higher than Cournot R&D.

Keywords: Process R&D; Network Externalities; Cournot; Bertrand; Product Differentiation (search for similar items in EconPapers)
JEL-codes: D43 L13 O31 (search for similar items in EconPapers)
Pages: 16 pages
Date: 2016-07
New Economics Papers: this item is included in nep-com, nep-cse, nep-ind, nep-ino, nep-net and nep-sbm
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Related works:
Journal Article: Network externalities and process R&D: A Cournot–Bertrand comparison (2020)
Working Paper: Network Externalities And Process R&D: A Cournot-Bertrand Comparison (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ind:igiwpp:2016-020

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