We thank two anonymous referees of this journal for helpful comments and suggestions. The usual disclaimer applies.
Entry, Profit and Welfare under Asymmetric R&D Costs
Article first published online: 27 AUG 2013
© 2013 The University of Manchester and John Wiley & Sons Ltd
The Manchester School
Volume 82, Issue 3, pages 284–295, June 2014
How to Cite
Mukherjee, A. and Ray, A. (2014), Entry, Profit and Welfare under Asymmetric R&D Costs. The Manchester School, 82: 284–295. doi: 10.1111/manc.12015
- Issue published online: 11 APR 2014
- Article first published online: 27 AUG 2013
- Manuscript Accepted: 22 MAR 2013
- Manuscript Received: 28 FEB 2012
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.