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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.


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

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Economics Letters



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Finance Commons



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