Abstract
This paper investigates the strategic choice between introducing a process
or a product innovation in a duopoly model with vertical differentiation,
comparing the outcomes in case of Bertrand and Cournot competition. It
is shown that under both competitive regimes three equilibria in innovation
adoption may arise: two symmetric equilibria, where firms select the
same innovation type, and one asymmetric equilibrium. The competitive
regime has an impact on the features of the asymmetric equilibrium, since
in case of Bertrand competition, the high (low) quality firm chooses a product (process) innovation, while firms make the opposite choices in case of Cournot competition. The presence of a leapfrogging effect (only in the
Cournot case) explains these different outcomes. Last, we find that the
Cournot competitors tend to favor the introduction of a new product in
comparison with the Bertrand competitors.
Lingua originale | English |
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pagine (da-a) | 139-159 |
Numero di pagine | 21 |
Rivista | International Game Theory Review |
Volume | 2010 |
Stato di pubblicazione | Pubblicato - 2010 |
Pubblicato esternamente | Sì |
Keywords
- innovation adoption
- vertical differentiation