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Cournot vs. Bertrand in mixed markets with R&D

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  • Basak, Debasmita
  • Wang, Leonard F.S.

Abstract

We investigate the question of endogenous choice of price and quantity competition in a mixed duopoly where both welfare maximising public firm and profit maximising private firm invest in cost-reducing R&D. In contrary to the conventional belief that Cournot competition arises in equilibrium, we find that price competition constitutes equilibrium. We further argue that the results that Cournot profit is strictly higher than Bertrand in standard oligopoly and that the Bertrand profit is strictly higher than Cournot in mixed oligopoly, both hold when the public and private firm engage in R&D. We also find that the public firm is more innovative than the private firm.

Suggested Citation

  • Basak, Debasmita & Wang, Leonard F.S., 2019. "Cournot vs. Bertrand in mixed markets with R&D," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 265-271.
    • Handle: RePEc:eee:ecofin:v:48:y:2019:i:c:p:265-271
    DOI: 10.1016/j.najef.2019.02.006
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    References listed on IDEAS

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    Cited by:

    1. Leonard F. S. Wang & Arijit Mukherjee & Chenhang Zeng, 2020. "Does technology licensing matter for privatization?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1462-1480, September.
    2. Pu‐yan Nie & Yong‐cong Yang, 2020. "Cost‐reduction innovation under mixed economy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1195-1201, October.
    3. Xu, Lili & Lee, Sang-Ho, 2024. "Endogenous competition with an integrated public utility firm under an output subsidy policy," Utilities Policy, Elsevier, vol. 87(C).
    4. Jiaqi Chen & Sang‐Ho Lee, 2023. "Cournot–Bertrand comparisons under R&D competition: Output versus R&D subsidies," International Journal of Economic Theory, The International Society for Economic Theory, vol. 19(1), pages 77-100, March.
    5. Yang, Le & Huang, Zining, 2023. "Quality-improving licensing of an outside innovator in a mixed Cournot duopoly," Economic Modelling, Elsevier, vol. 126(C).

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    More about this item

    Keywords

    Bertrand; Cournot; Differentiated products; Mixed markets; Process innovation;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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