Product R&D Investment Policies in an International Duopoly

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  • Yumiko Taba
    Faculty of Education and Integrated Arts and Sciences Waseda University 1‐6‐1, Nishi‐Waseda Shinjuku‐ku Tokyo 169‐8050 Japan
  • Yasunori Ishii
    Graduate School of Economics Waseda University 1‐6‐1, Nishi‐Waseda Shinjuku‐ku Tokyo 169‐8050 Japan

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<jats:title>Abstract</jats:title><jats:p>This study analyzes the optimal product R&D investment policies of a developed and a developing country in an international Cournot duopoly where firms from these two countries compete through endogenous quality–quantity decisions. We explore a new international trade model by using demand functions derived from utility functions. We find that the optimal product R&D investment policies for both countries are subsidies. This study counters a finding that used Hotelling‐type demand functions and it partially modifies another result that adopted the same demand functions but with an international Bertrand duopoly.</jats:p>

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