R&D Investment, Market Structure, and Industry Growth

Christos Koulovatianos and Leonard Mirman

University of Cyprus Working Papers in Economics from University of Cyprus Department of Economics

Abstract: We study how alternative market structures influence market supply and R&D investment decisions of firms operating in dynamic imperfectly competitive environments. Firms can reduce their future production cost through R&D investment today, which is the engine of endogenous industry growth. Our framework enables us to identify key strategic ingredients in firms dynamic competitive behavior through analytical characterizations. These ingredients are a static market externality, stemming from the standard oligopolistic Cournot competition, a dynamic externality that arises due to knowledge spillovers, and a dynamic market externality that comes from the interaction of knowledge spillovers with future market oligopolistic competition that firms internalize while making decisions. We isolate the impact of each strategic ingredient by comparing four alternative market structures.

Keywords: R&D investment; Cournot competition; oligopolistic non-cooperative dynamic games (search for similar items in EconPapers)
Pages: 43 pages
Date: 2003-11
New Economics Papers: this item is included in nep-ind and nep-tid
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ucy:cypeua:8-2003

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