PRICE VS QUANTITY IN A DUOPOLY WITH TECHNOLOGICAL SPILLOVERS: A WELFARE RE-APPRAISAL

Abstract

We analyse the problem of the choice of the market variable in a model where firms activate RD and (ii) there exists a set of the relevant parameters where a benevolent social planner prefers quantity setting to price setting. This happens when the marginal cost of R&D activities is relatively low while technological externalities are relatively high. In this situation, the conflict between social and private preferences over the type of market behaviour disappears.