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Comparing Cournot and Bertrand Equilibria in the Presence of Spatial Barriers and R&D

Author

Listed:
  • Kuang-Cheng Andy Wang

    (Chang Gung University
    Linkou Chang Gung Memorial Hospital)

  • Yi-Jie Wang

    (Ming Chuan University)

  • Wen-Jung Liang

    (National Dong Hwa University)

Abstract

We compare the equilibria under Bertrand and Cournot competition in the spatial barbell model where spatial barriers and process R&D are involved. We show that when the market becomes more competitive by switching from Cournot to Bertrand competition, R&D investment may increase (decrease) depending upon a low (high) transport rate. Next, we find that under Cournot competition total output, consumer surplus, and welfare are higher, but profit is lower than is true for Bertrand competition, when the transport rate is high, which overturns the traditional result.

Suggested Citation

  • Kuang-Cheng Andy Wang & Yi-Jie Wang & Wen-Jung Liang, 2021. "Comparing Cournot and Bertrand Equilibria in the Presence of Spatial Barriers and R&D," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(3), pages 475-491, May.
    • Handle: RePEc:kap:revind:v:58:y:2021:i:3:d:10.1007_s11151-020-09775-x
    DOI: 10.1007/s11151-020-09775-x
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    References listed on IDEAS

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    More about this item

    Keywords

    Bertrand competition; Cournot competition; Process R&D; Spatial barriers;
    All these keywords.

    JEL classification:

    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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