Product differentiation, process R&D, and the nature of market competition

Ping LIN; Kamal SAGGI

doi:10.1016/S0014-2921(00)00090-8

Product differentiation, process R&D, and the nature of market competition

Ping LIN, Kamal SAGGI

Department of Economics

Research output: Journal Publications › Journal Article (refereed) › peer-review

162 Citations (Scopus)

Abstract

We investigate the relationship between process and product RandD and compare the incentives for both types of RandD under different modes of market competition (Bertrand versus Cournot). It is shown that: (i) process RandD investments increase with the degree of product differentiation and firms invest more in product RandD when they can do process RandD than when they cannot; (ii) Bertrand firms have a stronger incentive for product RandD whereas Cournot firms invest more in process RandD; and (iii) cooperation in product RandD promotes both types of RandD relative to competition whereas cooperation in both types of RandD discourages RandD relative to cooperation in just product RandD.

Original language	English
Pages (from-to)	201-211
Number of pages	11
Journal	European Economic Review
Volume	46
Issue number	1
Early online date	29 Nov 2001
DOIs	https://doi.org/10.1016/S0014-2921(00)00090-8
Publication status	Published - Jan 2002

Funding

sWe thank editor Xavier Vives and two anonymous referees for their comments and suggestions which greatly improved the quality of this paper. Of course, we alone are responsible for any errors.

Keywords

Product R&D
Process R&D
Complementarity

Access to Document

10.1016/S0014-2921(00)00090-8

Cite this

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title = "Product differentiation, process R&D, and the nature of market competition",

abstract = "We investigate the relationship between process and product RandD and compare the incentives for both types of RandD under different modes of market competition (Bertrand versus Cournot). It is shown that: (i) process RandD investments increase with the degree of product differentiation and firms invest more in product RandD when they can do process RandD than when they cannot; (ii) Bertrand firms have a stronger incentive for product RandD whereas Cournot firms invest more in process RandD; and (iii) cooperation in product RandD promotes both types of RandD relative to competition whereas cooperation in both types of RandD discourages RandD relative to cooperation in just product RandD.",

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AB - We investigate the relationship between process and product RandD and compare the incentives for both types of RandD under different modes of market competition (Bertrand versus Cournot). It is shown that: (i) process RandD investments increase with the degree of product differentiation and firms invest more in product RandD when they can do process RandD than when they cannot; (ii) Bertrand firms have a stronger incentive for product RandD whereas Cournot firms invest more in process RandD; and (iii) cooperation in product RandD promotes both types of RandD relative to competition whereas cooperation in both types of RandD discourages RandD relative to cooperation in just product RandD.

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KW - Complementarity

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Product differentiation, process R&D, and the nature of market competition

Abstract

Funding

Keywords

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Product differentiation, process R&D, and the nature of market competition

Cite this