Cournot duopolies with investment in R&D: Regions of Nash investment equilibria

Abstract

We study a model of a Cournot duopoly where firms invest in R&D to reduce their production costs. Depending on the parameters, we may find regions with one, two or three Nash equilibria of the investment. Here, we study the effect of the parameters in these regions, in particular, we study the effect of the possible market saturation, the maximum relative cost reduction and the product differentiation, giving special attention to regions with multiple Nash equilibria. We observed that, in general, the competitive region, where both firms invest, is reduced as we increase the possible market saturation and the differentiation of the products and is enlarged when we increase the maximum relative cost reduction. (c) 2018, Springer International Publishing AG, part of Springer Nature.