|
on Technology and Industrial Dynamics |
| By: | Rupayan Pal (Indira Gandhi Institute of Development Research) |
| Abstract: | This paper compares equilibrium technology adoption in a differentiated duopoly under two alternative modes of product market competition, Cournot and Bertrand. It shows that the cost of technology has differential impact on technology adoption, that is, on cost-efficiency of the industry, under two alternative modes of product market competition. The possibility of ex post cost asymmetry between firms is higher under Bertrand competition than under Cournot competition. If the cost of technology is high, Bertrand competition leads to higher cost-efficiency than Cournot competition provided that the cost reducing effect of the technology is high. On the other hand, if the technology reduces the marginal cost of production by a very low amount, Cournot competition may lead to higher cost-efficiency than Bertrand competition. |
| Keywords: | Differentiated duopoly, limit-pricing, price effect, selection effect, technology adoption |
| JEL: | L13 L11 O31 D43 |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2009-001&r=tid |
| By: | Luigi Filippini (DISCE, Università Cattolica di Milano); Gianmaria Martini (Università di Bergamo) |
| Abstract: | This paper investigates the strategic choice between introducing a process or a product innovation in a duopoly model with vertical differentiation, comparing the outcomes in case of Bertrand and Cournot competition. It is shown that under both competitive regimes three equilibria in innovation adoption may arise: two symmetric equilibria, where firms select the same innovation type, and one asymmetric equilibrium. The competitive regime has an impact on the features of the asymmetric equilibrium, since in case of Bertrand competition, the high (low) quality firm chooses a product (process) innovation, while firms make the opposite choices in case of Cournot competition. The presence of a leapfrogging effect (only in the Cournot competitors tend to favor the introduction of a new product in comparison with the Bertrand competitors. |
| Keywords: | vertical differentiation, innovation adoption, process and product innovation, competitive regime. |
| JEL: | D43 L15 O33 |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:ctc:serie6:itemq0953&r=tid |