Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5086350 | Japan and the World Economy | 2009 | 7 Pages |
Abstract
We investigate a dynamic Cournot duopoly with intraindustry trade, where firms invest in R&D to reduce the level of iceberg transportation costs. We adopt both open-loop and closed-loop equilibrium concepts, showing that a unique (saddle point) steady state exists in both cases. In the open-loop model, optimal investments and the resulting efficiency of transportation technology are independent of the relative size of the two countries. On the contrary, in the closed-loop case firms' R&D incentives are driven by the relative size of the two countries. Policy implications are also evaluated.
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Authors
Luca Colombo, Luca Lambertini, Andrea Mantovani,