Starting from the static analysis in Eckert et al. (2017), we study a Cournot duopoly where firms can decide to incur fixed costs in activities that improve their competitiveness (i.e. product development or process innovation). Innovation costs generate discontinuities in the firms quantity best response functions and, in turn, a variety of equilibrium configurations, including multiple equilibria. We provide a dynamic global analysis of the equilibria and show the way in which firms' initial expectations regarding the rivals level of output are crucial in defining the configuration of the long run equilibrium.

Dynamic analysis of discontinuous best response with innovation

Lamantia, Fabio;
2018-01-01

Abstract

Starting from the static analysis in Eckert et al. (2017), we study a Cournot duopoly where firms can decide to incur fixed costs in activities that improve their competitiveness (i.e. product development or process innovation). Innovation costs generate discontinuities in the firms quantity best response functions and, in turn, a variety of equilibrium configurations, including multiple equilibria. We provide a dynamic global analysis of the equilibria and show the way in which firms' initial expectations regarding the rivals level of output are crucial in defining the configuration of the long run equilibrium.
2018
Discontinuous best response functions
Global analysis
Learning
Oligopolistic competition
Process innovation
Economics and Econometrics
Control and Optimization
Applied Mathematics
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/20.500.11769/602149
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