Endogenous transport price, R&D spillovers, and trade

Kazuhiro Takauchi and Tomomichi Mizuno

MPRA Paper from University Library of Munich, Germany

Abstract: Efficient distribution has a considerable influence on the sales volume of firms, and thus affects the firms' research and development (R&D) activities. This paper analyzes the relationship between competition in the transport sector and R&D of firms using the transportation services. We consider a two-region reciprocal market in which firms invest in cost-reducing R&D and use carriers that engage in price competition to supply their products to the foreign market. We show that, corresponding to the degree of R&D spillover, a transport cost (or price) reduction due to an increase in the number of carriers can increase or decrease the firms' R&D investments. This result is consistent with the finding in previous studies that trade liberalization can hinder R&D. Because inefficient firms lead to high prices in the market, an increase in the number of carriers may reduce consumer surplus. We further discuss a case in which firms have monopsony power in transportation services and show that our main results are robust to the extension.

Keywords: Transport price; R&D spillovers; Price competition; Monopsony power (search for similar items in EconPapers)
JEL-codes: F12 L13 R40 (search for similar items in EconPapers)
Date: 2020-08-13
New Economics Papers: this item is included in nep-com and nep-tre
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Journal Article: Endogenous transport price, R&D spillovers, and trade (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:102391

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