RES AND DEV INVESTMENT IN A SYMMETRICAL AND HOMOGENEOUS OLIGOPOLY - BERTRAND VS COURNOT

Abstract In this paper we compare the equilibrium R & D investment under Bertrand and Cournot competition in a symmetric and homogeneous oligopoly. It is shown that, although the R&D investment is greater under Bertrand competition, social welfare, net of R & D costs, may be greater under Cournot competition. This conflict between static and dynamic efficiency arises because too many resources may be invested in R & D when there is price competition in the product market.