Complementarities and Commitment in a Cournot Setting
ISSN: 0186-7202
Ano de publicación: 2002
Volume: 17
Número: 1
Páxinas: 3-36
Tipo: Artigo
Outras publicacións en: Estudios económicos
Resumo
When oligopolistic firms compete by investing simultaneously in cost-reducing RD and in demand-creating advertising expenditures, their strategic commitment in such assets may differ qualitatively from the behavior pursued when only one of them is used. In particular, if RD (and advertising) investment is decided on and made public before selecting the output, then cases of undercommitment in cost reduction can arise despite the non-existence of technological spillovers; and others in which there is no room for a differentiated strategic use of RD. Furthermore, when advertising is included among the investment variables of firms, their RD expenses may equal or even exceed the socially optimal level.