Market competition, R&D and firm profits in asymmetric oligopoly

Arbeitspapier

We investigate a Cournot model with strategic R&D investments wherein efficient low-cost firms compete against less efficient high-cost firms. We find that an increase in the number of high-cost firms can stimulate R&D by the low-cost firms, while it always reduces R&D by the high-cost firms. More importantly, this force can be strong enough to compensate for the loss that arises from more intense market competition: the low-cost firms' profits may indeed increase with the number of high-cost firms. An implication of this result is far-reaching, as it gives low-cost firms an incentive to help, rather than harm, high-cost competitors. We relate this implication to a practice known as open knowledge disclosure, especially Ford's strategy of disclosing its know-how publicly and extensively at the beginning of the 20th century.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ISER Discussion Paper ; No. 777

Classification and Topics

• Classification: Wirtschaft ; Oligopoly and Other Imperfect Markets ; Management of Technological Innovation and R&D ; Business Economics
• Subject: competition ; oligopoly ; R&D ; heterogeneity ; entry ; Technischer Fortschritt ; Markteintritt ; Wettbewerb ; Duopol ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ishida, Junichiro ; Matsumura, Toshihiro ; Matsushima, Noriaki
• Event: Veröffentlichung
• (who): Osaka University, Institute of Social and Economic Research (ISER)
• (where): Osaka
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/92582