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Market Competition, R&D and Firm Profits in Asymmetric Oligopoly |
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Junichiro Ishida,
Toshihiro Matsumura and Noriaki Matsushima |
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JIE(2011) |
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We investigate a Cournot model with strategic R&D investments wherein efficient
low-cost firms compete against less efficient high-cost firms. We find that
an increase in the number of high-cost firms can stimulate R&D by the
low-cost firms, while it always reduces R&D by the high-cost firms. More
importantly, this force can be strong enough to compensate for the loss that
arises from more intense market competition: the low-cost firms¡¦ profits may
indeed increase with the number of high-cost firms. An implication of this
result is far-reaching, as it gives low-cost firms an incentive to help,
rather than harm, high-cost competitors. We relate this implication to a practice
known as open knowledge disclosure, especially Ford¡¦s strategy of disclosing
its know-how publicly and extensively at the beginning of the 20th century. |