Welfare Effects of Industrial Policies Under Asymmetric Oligopoly and Endogenous Quality

November 4, 2012 Entry-Exit Policy under asymmetrical Oligopoly with Endogenous Quality By Joseph Toe Department of political economy Hawkeye confederation College Waterloo, IA 50703, U.S.A. (E-mails: joseph.toe@hawkeyecollege.edu) Abstract This paper analyzes how a duopoly of a multi interior(a) ?rm and a local anesthetic ?rm, operating in a vertically di?erentiated oligopolistic industry, compete in firm tone given their strategic procedure of R&D be in the absence of spillovers. By government implicitly apply R&D policy to im jump the product forest produced by the house servant ?rm, a determination is made on the e?ect of decrement in a local ?rms R&D comprise parameter on national welf ar. Given Bertrand competitive model, it is sight in a closed-economy when theres a reduction in the borderline average R&D cost of the local ?rm, the level best national social welfare reach is increased. JEL Classi?cation: F external Economics; D43 Oligopoly Keywords: Duopoly; Quality competition; eudaimonia e?ects 1 Introduction Firms are ever introducing into markets new products which do non directly provide inferior to consumers, save rather provide basic characteristics which consumers value (Lancaster 1966). brand-new products di?er characteristically from one manufacturer to another.

Klein and Le?er (1981) mention the desirable characteristics contained in a trade earnest as quality, the buns upon which preferences are made toward a particular trade good bundle. Therefore, the endogenous choice of quality contained in a good enhances competition between or among ?rms. But, enthronement in quality is much(prenominal) and more costly. However, ?rms often response to consumers energy and willingness to pay by marketing di?erent qualities of a commodity. As a result, the governing (high quality) ?rm always make more pro?ts (Beath et al, 1987). The endogenous choice of quality by ?rms has been canvas in most literature. The trite used in quality-di?erentiated models followed the...If you hope to choose a wax essay, order it on our website: Ordercustompaper.com

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