On the Dynamic Analysis of Cournot-Bertrand Equilibria

Authors

Aggey Semenov
Jean-Baptiste Tondji, The University of Texas Rio Grande ValleyFollow

Document Type

Article

Publication Date

10-2019

Abstract

Highlights

• Firms invest in R&D. One firm sets a quantity, and another sets a price.

• The quantity-setting firm invests more in R&D than the price-setting firm.

• The quantity-setting firm has higher profits than in Bertrand and Cournot.

• Consumer surplus and social welfare are higher than in the Cournot model.

• The quantity-setting firm may produce more than social optimum.

Abstract

We consider a setting where firms in the first stage invest in cost-reducing R&D. In the market stage, one firm sets a quantity, and another sets a price. We prove that the quantity-setting firm invests more in R&D, has a lower price, and produces higher quantity than the price-setting firm. We also consider welfare implications.

Comments

Original published version available at https://doi.org/10.1016/j.econlet.2019.108549

Recommended Citation

Semenov, A. and Tondji, J.B., 2019. On the dynamic analysis of Cournot–Bertrand equilibria. Economics Letters, 183, p.108549. https://doi.org/10.1016/j.econlet.2019.108549

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.

Publication Title

Economics Letters

DOI

10.1016/j.econlet.2019.108549