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Lambertini, Luca
Mantovani, Andrea
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Quaderni - Working Paper DSE No. 389
Alma Mater Studiorum - Università di Bologna, Dipartimento di Scienze Economiche (DSE), Bologna
We analyse the problem of the choice of the market variable in a model where firms activate R&D investments for process innovation. We establish that (i) firms always choose the Cournot behaviour; and (ii) there exists a set of the relevant parameters where a benevolent social planner prefers quantity setting to price setting. This happens when the marginal cost of R&D activities is relatively low while technological externalities are relatively high. In this situation, the conflict between social and private preferences over the type of market behaviour disappears.
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