Cournot model with investments to change the market size |
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| Authors: | Alberto A Pinto Fernanda A Ferreira Miguel Ferreira Bruno MPM Oliveira |
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| Institution: | 1. Departamento de Matemática da Escola de Ciências da Universidade do Minho, Campus do Gualtar, 4710-057, Braga, Portugal;2. Departamento de Matemática, ESEIG-Instituto Politêcnico do Porto, Rua D. Sancho I, 981, 4480-876, Vila do Conde, Portugal;3. Faculdade de Ciências da Nutrição e Alimentação da Universidade do Porto, Rua Dr. Roberto Frias, 4250-465 Porto, Portugal |
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| Abstract: | We present a new deterministic dynamical model on the market size of Cournot competitions, based on Nash equilibria of R&D investment strategies to increase the size of the market of the firms at every period of the game. We compute the unique Nash equilibrium for the second subgame and the profit functions for both firms. Adding uncertainty to the R&D investment strategies, we get a new stochastic dynamical model and we analyse the importance of the uncertainty to reverse the initial advantage of one firm with respect to the other. (© 2008 WILEY-VCH Verlag GmbH & Co. KGaA, Weinheim) |
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