BERTRAND AND COURNOT COMPETITIONS IN ADYNAMIC GAME

This paper compares Bertrand and Cournot equilibria in a horizontallydifferentiated duopoly market with non-tournament R&D competition. We consider thatsuccess in R&D is uncertain. We show that whether firms invest more under Cournotcompetition or Bertrand competition is ambiguous and depends on the probability ofsuccess in R&D but does not depend on the degree of product differentiation. While‘static’ welfare is higher under Bertrand competition, we find that ‘dynamic’ welfare maybe higher under Cournot competition for moderate R&D productivities...