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Strategic R&D risk choices of public and private firms

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  • Mingqing Xing

Abstract

This paper investigates the R&D (research and development) risk choices of private and public firms in a product differentiated mixed duopoly market. Using the canonical models of R&D risk choice in a mixed market, it compares market performances between Cournot and Bertrand. The main findings are (i) public firm always engages in higher R&D risks than private firm under Cournot, (ii) public firm mostly chooses higher R&D risks, but may choose lower R&D risks than private firm if the degree of product substitution is sufficiently large under Bertrand, (iii) both public and private firms are more willing to take R&D risks under Bertrand than under Cournot, and (iv) from the perspective of social welfare, private firm always assumes too low R&D risks under Cournot. However, it takes excessive risks if the degree of product substitution is large enough under Bertrand.

Suggested Citation

  • Mingqing Xing, 2019. "Strategic R&D risk choices of public and private firms," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 32(1), pages 717-741, January.
    • Handle: RePEc:taf:reroxx:v:32:y:2019:i:1:p:717-741
    DOI: 10.1080/1331677X.2019.1578679
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