When Laggards Fight Back against Leaders in R&D Activities Joint work with Noriaki Matsushima OT2010

Plan of the Presentation (1) Helping minor firm reduces welfare. (2) R&D investments and firm size (3) Helping minor firm reduces consumer surplus (4) Strategic incentive of R&D investment in a asymmetric location price model OT2010

Helping minor firms reduces welfare OT2010

Lahiri and Ono (1988) A decrease in the cost of minor firm (the firm with higher cost) can reduce welfare Welfare-reducing production substitution ・A decrease of the marginal cost of the firm with higher cost reduces the output of the firm with lower marginal cost →It increases total production cost and reduces welfare OT2010

Welfare-reducing production substitution reaction curve of firm 1 Y2 reaction curve of firm 2 企業２の生産量 reaction curve of firm 2 Y1 OT2010

Helping minor firm Helping minor firm can reduce welfare (a) welfare-reducing production substitution (b) An increase the total output improves consumer welfare. (a) can dominate (b). It more likely occurs when the cost difference is large. OT2010

Helping minor firm in Hotelling model Maximal differentiation A decrease of the minor firm (firm 2) increases the share of firm 2 and reduces the share of firm 1 It can reduce social welfare, while it always improves consumer surplus. OT2010

Excess entry theorem In imperfect competitive markets, a slight reduction of the number of entering firms at the free entry equilibrium improves welfare ~excess entry theorem. However, it reduces consumer welfare. OT2010

our paper Helping minor firm can reduce consumer surplus (and total social surplus). OT2010

より投資するのはminor firmかmajor firmか？ R&Dには規模の経済性が 資金制約 戦略効果 minor firmがより投資する Arrow effect, leap frog →minor firm が成功するとmajorになる、遅れた企業の方が投資費用が小さい OT2010

our paper （投資の前後でも）minor なfirm が戦略的な誘因でより多く投資する可能性がある。しかしこれは経済厚生も消費者の利益も損なう。 OT2010

Model Hotelling model, mill pricing, location then price model 移動費用などの仮定は標準的なもの 企業１の方が限界費用が低い。 (1) 企業１がまず立地を選択 (2) その後企業２が立地を選択 (3) 価格競争 OT2010

backward induction (3) 価格競争は立地を所与とした、費用格差のないBertrand 競争。距離が近いほど激しい競争になり価格が下がる。 (2)企業２は企業１との距離を出来るだけ大きく取る (1)企業１は格差が小さいときには直線都市の端に立地。格差が一定程度以上になると段々真ん中に近づく。 OT2010

Welfare Implication 弱い企業が少し強くなり差が縮まる (a) 立地を所与とすれば、価格競争は強まる (b) 企業１がより端に立地し、価格競争が弱まる (b)の効果が強いとconsumer surplusが下がってしまう→helping minor firm reduces consumer surplus (c) 強い企業のマーケットシェアが下がり、welfare-reducing production substitutionが起こる。 Helping minor firm distorts the product positioning of the major firm and can reduce both consumer surplus and total social surplus. OT2010

R&D もし企業１が投資によって差を広げられたら？ もし企業２が投資によって差を縮められたら？ どちらの方が投資の誘因は強いか？ (a) Economy of the scale ~戦略的な効果がなければ投資の誘因は生産量に比例→企業１の方が投資の誘因大 (b) Strategic effect~企業２が投資すると企業１の立地が変化→企業２の方が投資の誘因大 (b)が(a)をdominateしうる。 OT2010