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Quality‐improving R&D and merger policy in a differentiated duopoly: Cournot and Bertrand equilibria

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  • Nobuyuki Takashima
  • Yasunori Ouchida

Abstract

We combine a model of product research and development (R&D) and technological spillover with the concept of technological distance and examine horizontal mergers in a duopolistic market with R&D. The results are fourfold. First, a merger can better encourage R&D investment than the competition case. Second, with a small degree of product differentiation (PD), the merger criterion under the Cournot duopoly is stricter than that of the Bertrand case. By contrast, with a moderate or large degree of PD, the opposite is true. Third, with a small technological distance, a merger should be allowable. Finally, with a small degree of PD and moderate technological distance, a merger should be allowable.

Suggested Citation

  • Nobuyuki Takashima & Yasunori Ouchida, 2020. "Quality‐improving R&D and merger policy in a differentiated duopoly: Cournot and Bertrand equilibria," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1338-1348, October.
    • Handle: RePEc:wly:mgtdec:v:41:y:2020:i:7:p:1338-1348
    DOI: 10.1002/mde.3179
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