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arXiv · 1906.03995

A differential game analysis of R&D in oligopoly with differentiated goods under general demand and cost functions: Bertrand vs. Cournot

Masahiko Hattori·Yasuhito Tanaka
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Abstract

We study a dynamic oligopoly with differentiated goods by differential game approach under general demand and cost functions. We show that the steady state value of the R&D investment by each firm is decreasing with respect to the number of firms, and the steady state value of the industry R&D investment is increasing with respect to the number of firms. Also we show that if there is no spillover, whether the R&D investment of each firm given the cost level in the memoryless closed-loop case is larger or smaller than that in the open-loop case depends on whether the strategic variables are strategic substitutes or strategic complements. Further we show that the memoryless closed-loop solution and the feedback solution (by the Hamilton-Jacobi-Bellman equation) are equivalent.

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Masahiko Hattori, Yasuhito Tanaka. 2019-06-05. A differential game analysis of R&D in oligopoly with differentiated goods under general demand and cost functions: Bertrand vs. Cournot. https://arxiv.org/abs/1906.03995

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