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Quality‐improving R&D and merger policy in a differentiated duopoly: Cournot and Bertrand equilibria
Author(s) -
Takashima Nobuyuki,
Ouchida Yasunori
Publication year - 2020
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.3179
Subject(s) - cournot competition , duopoly , bertrand competition , spillover effect , product differentiation , economics , microeconomics , competition (biology) , product (mathematics) , quality (philosophy) , investment (military) , degree (music) , bertrand paradox (economics) , industrial organization , oligopoly , mathematics , physics , geometry , quantum mechanics , politics , political science , acoustics , law , biology , ecology
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.