Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92582
Authors: 
Ishida, Junichiro
Matsumura, Toshihiro
Matsushima, Noriaki
Year of Publication: 
2010
Series/Report no.: 
ISER Discussion Paper, Institute of Social and Economic Research, Osaka University 777
Abstract: 
We investigate a Cournot model with strategic R&D investments wherein efficient low-cost firms compete against less efficient high-cost firms. We find that an increase in the number of high-cost firms can stimulate R&D by the low-cost firms, while it always reduces R&D by the high-cost firms. More importantly, this force can be strong enough to compensate for the loss that arises from more intense market competition: the low-cost firms' profits may indeed increase with the number of high-cost firms. An implication of this result is far-reaching, as it gives low-cost firms an incentive to help, rather than harm, high-cost competitors. We relate this implication to a practice known as open knowledge disclosure, especially Ford's strategy of disclosing its know-how publicly and extensively at the beginning of the 20th century.
Subjects: 
competition
oligopoly
R&D
heterogeneity
entry
JEL: 
L13
O32
M21
Document Type: 
Working Paper

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