Welfare Effects of Industrial Policies Under Asymmetric Oligopoly and Endogenous Quality

November 4, 2012 Entry-Exit Policy under Asymmetric Oligopoly with Endogenous Quality By Joseph Toe Department of Economics Hawkeye federation College Waterloo, IA 50703, U.S.A. (E-mails: joseph.toe@hawkeyecollege.edu) Abstract This penning analyzes how a duopoly of a multinational ?rm and a local ?rm, in operation(p) in a vertically di?erentiated oligopolistic industry, compete in solid tone given their strategic use of R&D bells in the absence of spillovers. By government implicitly using R&D policy to im prove the harvest-time gauge produced by the house servant ?rm, a intention is made on the e?ect of decrement in a local ?rms R&D greet parameter on national welf ar. Given Bertrand competitive model, it is cud in a closed-economy when theres a decrease in the marginal average R&D cost of the local ?rm, the maximum national social welfare deliver the goodish enoughs is increased. JEL Classi?cation: F external Economics; D43 Oligopoly Key words: Duopoly; Quality competition; wellbeing e?ects 1 Introduction Firms are constantly introducing into markets radical products which do not directly provide inferior to consumers, just now rather provide basic characteristics which consumers value (Lancaster 1966). brand-new products di?er characteristically from one producer to another.

Klein and Le?er (1981) recognise the desirable characteristics contained in a good as quality, the backside upon which preferences are made toward a particular trade good bundle. Therefore, the endogenous election of quality contained in a good enhances competition between or among ?rms. But, investment in quality is more and more costly. However, ?rms often response t! o consumers ability and willingness to compensation by selling di?erent qualities of a commodity. As a result, the ascendant (high quality) ?rm always make more pro?ts (Beath et al, 1987). The endogenous choice of quality by ?rms has been studied in most literature. The standardized used in quality-di?erentiated models followed the...If you want to choose a blanket(a) essay, order it on our website: OrderEssay.net

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