Comparing Cournot and Bertrand Equilibria in the Presence of Spatial Barriers and R&D

Kuang Cheng Andy Wang, Yi Jie Wang, Wen Jung Liang*

*Corresponding author for this work

Research output: Contribution to journalJournal Article peer-review

Abstract

We compare the equilibria under Bertrand and Cournot competition in the spatial barbell model where spatial barriers and process R&D are involved. We show that when the market becomes more competitive by switching from Cournot to Bertrand competition, R&D investment may increase (decrease) depending upon a low (high) transport rate. Next, we find that under Cournot competition total output, consumer surplus, and welfare are higher, but profit is lower than is true for Bertrand competition, when the transport rate is high, which overturns the traditional result.

Original languageEnglish
Pages (from-to)475-491
Number of pages17
JournalReview of Industrial Organization
Volume58
Issue number3
DOIs
StatePublished - 05 2021

Bibliographical note

Publisher Copyright:
© 2020, Springer Science+Business Media, LLC, part of Springer Nature.

Keywords

  • Bertrand competition
  • Cournot competition
  • Process R&D
  • Spatial barriers

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