SFB 303 Discussion Paper No. A - 357
Author: Nett, Lorenz
Title: R&D innovation in a mixed duopolistic market
Abstract: The paper provides an explanation why public firms produce at higher
average costs than private firms. To establish this result we deal with a
mixed duopoly allowing both firms to choose among various technologies. The
corresponding cost functions can be interpreted as the consequence of
different investment levels in research and development. We will see that
a private firm has an incentive to operate at lower variable costs but
higher fixed costs than a public firm. Comparisons of a mixed duopoly with
duopolies of two private and of two public firms, respectively, indicate how
the allocation is affected by public production. In particular, the paper
proves that destructive competition is more likely in the presence of
public firms.
Keywords:
JEL-Classification-Number:
Creation-Date: December 1991
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