| Abstract: |
To examine the role of shipping firms in the international research and
development (R&D) rivalry, we build a two-country (exporting and importing),
two-firm (exporting and local) duopoly model with a shipping firm. The
exporting firm competes with the local firm in the duopoly market of the local
country but must pay a shipping fee to the shipping firm in order to sell its
product in the local market. Similar to market competition, exporting and
local firms engage in R&D competition. We compare two timing structures of the
game: in one, the R&D stage is first, and in the other, the shipping firm is
the leader. We show that when the R&D stage is first, there are ranges of
parameter values such that the investment level of the exporting firm
decreases as R&D becomes more efficient. When the shipping firm is the leader,
we show that there are ranges of parameter values such that the profit of the
local firm decreases as R&D becomes more efficient. Further, it is shown that
consumers in the local country prefer the regime in which the shipping firm is
the leader, whereas the government of the local country prefers the other
regime. |