Cournot vs. Bertrand in mixed markets with R&D

We investigate the question of endogenous choice of price and quantity competition in a mixed duopoly where both welfare maximising public firm and profit maximising private firm invest in cost-reducing R&D. In contrary to the conventional belief that Cournot competition arises in equilibrium, w...

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Bibliographic Details
Published inThe North American journal of economics and finance Vol. 48; pp. 265 - 271
Main Authors Basak, Debasmita, Wang, Leonard F.S.
Format Journal Article
LanguageEnglish
Published Elsevier Inc 01.04.2019
Subjects
Bertrand
Cournot
Differentiated products
Mixed markets
Process innovation
D43
Differentiated products
H42
Mixed markets
Bertrand
Cournot
O31
Process innovation
L13
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Summary:We investigate the question of endogenous choice of price and quantity competition in a mixed duopoly where both welfare maximising public firm and profit maximising private firm invest in cost-reducing R&D. In contrary to the conventional belief that Cournot competition arises in equilibrium, we find that price competition constitutes equilibrium. We further argue that the results that Cournot profit is strictly higher than Bertrand in standard oligopoly and that the Bertrand profit is strictly higher than Cournot in mixed oligopoly, both hold when the public and private firm engage in R&D. We also find that the public firm is more innovative than the private firm.
ISSN:1062-9408
1879-0860
DOI:10.1016/j.najef.2019.02.006