On the dynamic efficiency of Bertrand and Cournot equilibria

Research output: Journal PublicationsJournal Article (refereed)

139 Citations (Scopus)

Abstract

This paper compares Bertrand and Cournot equilibria in a differentiated duopoly with R&D (research and development) competition. It shows that Cournot competition induces more R&D effort than Bertrand competition. However, the price is lower and output is larger in Bertrand than in Cournot competition. Furthermore, the Bertrand equilibrium is more efficient than the Cournot equilibrium if either R&D productivity is low, or spillovers are weak, or products are very different. If R&D productivity is high, spillovers are strong, and goods are close substitutes, then the Bertrand equilibrium is less efficient than the Cournot equilibrium
Original languageEnglish
Article numberET962270
Pages (from-to)213-229
Number of pages17
JournalJournal of Economic Theory
Volume75
Issue number1
DOIs
Publication statusPublished - Jul 1997
Externally publishedYes

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