{"title":"Can Rivalry in R&D be Harmful Under Supply Function Competition?","authors":"Ismail Saglam","doi":"10.1080/13571516.2022.2138091","DOIUrl":null,"url":null,"abstract":"Abstract We consider a duopoly with cost asymmetry and demand uncertainty and show that rivalry in (process) R&D can be extremely harmful to both firms even in the presence of spillovers if the firms produce under supply function competition. However, if they produce under Cournot competition, firms can earn higher profits in the presence of R&D rivalry than what they could earn when they (mutually) invested in no R&D. We also show that R&D rivalry always works to widen the efficiency gap between the firms under Cournot competition, and also under supply function competition if R&D spillovers are present. On the other hand, consumers’ welfare is affected by R&D rivalry only under supply function competition. Under this competition, consumers always prefer the presence of R&D rivalry with or without spillovers to the absence of R&D rivalry; however, they obtain their highest surplus under R&D rivalry when there are no R&D spillovers.","PeriodicalId":45470,"journal":{"name":"International Journal of the Economics of Business","volume":null,"pages":null},"PeriodicalIF":1.9000,"publicationDate":"2022-09-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"International Journal of the Economics of Business","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1080/13571516.2022.2138091","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"BUSINESS","Score":null,"Total":0}
引用次数: 1
Abstract
Abstract We consider a duopoly with cost asymmetry and demand uncertainty and show that rivalry in (process) R&D can be extremely harmful to both firms even in the presence of spillovers if the firms produce under supply function competition. However, if they produce under Cournot competition, firms can earn higher profits in the presence of R&D rivalry than what they could earn when they (mutually) invested in no R&D. We also show that R&D rivalry always works to widen the efficiency gap between the firms under Cournot competition, and also under supply function competition if R&D spillovers are present. On the other hand, consumers’ welfare is affected by R&D rivalry only under supply function competition. Under this competition, consumers always prefer the presence of R&D rivalry with or without spillovers to the absence of R&D rivalry; however, they obtain their highest surplus under R&D rivalry when there are no R&D spillovers.
期刊介绍:
International Journal of the Economics of Business presents original, peer reviewed research in economics that is clearly applicable to business or related public policy problems or issues. The term "business" is used in its widest sense to encompass both public and private sector—governmental, private non-profit and cooperative organizations, as well as profit-seeking enterprises. International Journal of the Economics of Business carries papers relating to three main spheres: The organization—to analyse and aid decision making and the internal organization of the business; The industry—to analyse how businesses interact and evolve within and across industries.