Market Competition, R&D and Firm Profits in Asymmetric Oligopoly - ResearchGate

We investigate a cournot model with strategic R&D invesments wherein efficient low-cost firms compete againts less efficient high cost firms. We find that as increase in the number of high-cost firms can stimulate R&D by the low-cost firms, while it always reduces R&D by the high-cost firms. More importantly, this force can be strong enough to compensate for loss that arises from more intense market competition: the low-cost firms' profits may indeed increase with the number of high-cost firms.