Tuesday, November 9, 2010
Posted by D. Daniel Sokol
Akio Kawasaki, Ming Hsin Lin, and Noriaki Matsushima (all The Institute of Social and Economic Research Osaka University) explain Multi-market competition, R&D, and welfare in oligopoly.
ABSTRACT: We investigate a multi-market Cournot model with strategic process R&D investments wherein a multi-market monopolist meets entrants that enter one of the markets. We find that entry can enhance the total R&D expenditure of the incumbent firm. That is, entry can stimulate R&D effort. Moreover, the incumbent's profit nonmonotonically changes as the number of entrants increases. Depending on the fixed entry costs and R&D technologies, both insufficient and excess entrycan appear.