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Entry, Profit and Welfare under Asymmetric R & D Costs
Author(s) -
Mukherjee Arijit,
Ray Achintya
Publication year - 2014
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12015
Subject(s) - welfare , economics , microeconomics , profit (economics) , oligopoly , production (economics) , production cost , social welfare , monetary economics , cournot competition , market economy , mechanical engineering , engineering , political science , law
We show the effects of entry of a new firm on the profits and welfare when the firms share the same initial cost of production but differ in terms of the costs of undertaking R & D . Considering a C ournot oligopoly model with innovation and linear demand and production costs, we show that entry reduces the profits of the incumbent firms and it can be welfare reducing.