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Cournot and Bertrand Competition in a Differentiated Duopoly with Endogenous Technology Adoption

Author

Listed:
  • Hongkun Ma

    (School of Economics, Shandong University)

  • X. Henry Wang

    (Department of Economics, University of Missouri-Columbia)

  • Chenhang Zeng

    (School of Economics, Shandong University)

Abstract

We study firms' endogenous technology adoption in a two-stage differenti- ated duopoly game. Firms choose technologies from a continuous technology set in stage one, and engage in either Cournot or Bertrand competition in stage two. If the technology set is sufficiently convex and the degree of product dif- ferentiation is sufficiently high, we find that (i) Bertrand competition leads to more interior technology choices than Cournot competition, and (ii) Cournot competition induces a greater incentive to innovate for both firms. Further- more, welfare analysis shows that Bertrand competition always yields higher consumer surplus and social welfare than Cournot competition although the marginal cost of production is higher.

Suggested Citation

  • Hongkun Ma & X. Henry Wang & Chenhang Zeng, 2015. "Cournot and Bertrand Competition in a Differentiated Duopoly with Endogenous Technology Adoption," Annals of Economics and Finance, Society for AEF, vol. 16(1), pages 231-253, May.
    • Handle: RePEc:cuf:journl:y:2015:v:16:i:1:ma
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    Citations

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    Cited by:

    1. Constantine Angyridis & Haiwen Zhou, 2022. "Search, technology choice, and unemployment," International Studies of Economics, John Wiley & Sons, vol. 17(3), pages 296-310, September.
    2. Binglin Gong & Haiwen Zhou, 2023. "The choice of technology and international trade," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 32(7), pages 1035-1057, October.
    3. Haiwen Zhou, 2022. "The Choice of Technology and Economic Geography," International Economic Journal, Taylor & Francis Journals, vol. 36(1), pages 1-18, January.
    4. Leonard F. S. Wang & Domenico Buccella, 2023. "The Timing of Technology Adoption in Network Industries," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(4), pages 367-392, June.

    More about this item

    Keywords

    Technology adoption; Differentiated duopoly; Cournot competition; Bertrand competition;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior

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