MetaTOC stay on top of your field, easily

Entry, Profit and Welfare under Asymmetric R&D Costs

,

Manchester School

Published online on

Abstract

We show the effects of entry of a new firm on the profits and welfare when the firms share the same initial cost of production but differ in terms of the costs of undertaking R&D. Considering a Cournot oligopoly model with innovation and linear demand and production costs, we show that entry reduces the profits of the incumbent firms and it can be welfare reducing.