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Product R&D Investment Policies in an International Duopoly
Author(s) -
Taba Yumiko,
Ishii Yasunori
Publication year - 2016
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12241
Subject(s) - duopoly , cournot competition , economics , subsidy , investment (military) , microeconomics , product (mathematics) , bertrand competition , product differentiation , oligopoly , market economy , mathematics , political science , law , geometry , politics
This study analyzes the optimal product R&D investment policies of a developed and a developing country in an international Cournot duopoly where firms from these two countries compete through endogenous quality–quantity decisions. We explore a new international trade model by using demand functions derived from utility functions. We find that the optimal product R&D investment policies for both countries are subsidies. This study counters a finding that used Hotelling‐type demand functions and it partially modifies another result that adopted the same demand functions but with an international Bertrand duopoly.