Endogenous Choice of Capacity and Product Innovation in a Differentiated Duopoly

Lambertini, Luca ; Rossini, Gianpaolo (1998) Endogenous Choice of Capacity and Product Innovation in a Differentiated Duopoly. DOI 10.6092/unibo/amsacta/729.
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Abstract

We model a symmetric duopoly where firms choose whether to be quantity setters or price setters by deciding the optimal capacity; undertake R&D activity to determine the degree of differentiation; and finally compete in the market. Two games are proposed, where investment decisions follow different sequences. We assess price and quantity decisions, finding a set of equilibria where the choice of the market variable is affected by both technological commitments. As a result, the acquired wisdom that quantity setting is a dominant strategy for firms, while price setting is a dominant strategy from a social standpoint, may not be confirmed.

Abstract
Document type
Monograph (Working Paper)
Creators
CreatorsAffiliationORCID
Lambertini, Luca
Rossini, Gianpaolo
Keywords
R&D product innovation capacity
Subjects
DOI
Deposit date
17 Jun 2004
Last modified
17 Feb 2016 14:02
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