{"title":"Strategic Commitment with R&D: The Symmetric Case","authors":"James A. Brander, Barbara J. Spencer","doi":"10.2307/3003549","DOIUrl":null,"url":null,"abstract":"When research and development take place before the associated output is produced, imperfectly competitive firms may use R&D for strategic purposes rather than simply to minimize costs. Using a simple symmetric two-stage Nash duopoly model, we show that such strategic use of R&D will increase the total amount of R&D undertaken, increase total output, and lower industry profit. However, the strategic use of R&D introduces inefficiency in that total costs are not minimized for the output chosen. Nevertheless, net welfare may rise, and certainly rises if products are homogeneous, marginal cost is non-decreasing, and demand is convex or linear.","PeriodicalId":177728,"journal":{"name":"The Bell Journal of Economics","volume":"2019 1","pages":"0"},"PeriodicalIF":0.0000,"publicationDate":"1900-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"483","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"The Bell Journal of Economics","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2307/3003549","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 483
Abstract
When research and development take place before the associated output is produced, imperfectly competitive firms may use R&D for strategic purposes rather than simply to minimize costs. Using a simple symmetric two-stage Nash duopoly model, we show that such strategic use of R&D will increase the total amount of R&D undertaken, increase total output, and lower industry profit. However, the strategic use of R&D introduces inefficiency in that total costs are not minimized for the output chosen. Nevertheless, net welfare may rise, and certainly rises if products are homogeneous, marginal cost is non-decreasing, and demand is convex or linear.