S-WoPEc
 
Scandinavian Working Papers in Economics
HomeAboutSeriesSubject/JEL codesAdvanced Search
CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology KTH/CESIS Working Paper Series in Economics and Institutions of Innovation

No 18:
Process Innovations in a Duopoly with Two Region

Olof Ejermo () and Börje Johansson ()

Abstract: Most models of duopolies with a spatial dimension refer to the 'linear' or 'circular' city. Moreover, in duopoly models with innovations, the spatial dimension is usually dropped. We bridge this gap by constructing a model with two regions, each hosting production of a differentiated quality (high and low quality). In addition, consumers are heterogeneous with different willingness to pay for quality. The analysis focuses on the incentives for process innovations which affect the unit cost of production. The model is used to analyze two common trends in the urbanization process and their effects on the incentive for process innovations. The first is increased transportation costs and worsened interregional accessibility (the result is reversed for a decrease in transportation costs). We find that such changes increase the amount of process R&D more in the region producing a low-quality good than in the region producing a high-quality good. Second, we examine the effect on optimal process R&D of moving consumers from the region producing low-quality goods to the region producing high-quality goods. This lowers the optimal amount of process R&D undertaken in the region producing the low-quality good, while it is raised in the other region.

Keywords: Regional agglomeration; process innovations; duopoly; (follow links to similar papers)

JEL-Codes: C72; L13; O31; R30; (follow links to similar papers)

26 pages, November 29, 2004

Before downloading any of the electronic versions below you should read our statement on copyright.
Download GhostScript for viewing Postscript files and the Acrobat Reader for viewing and printing pdf files.

Full text versions of the paper:

cesiswp18.pdf    PDF-file
Download Statistics

Questions (including download problems) about the papers in this series should be directed to Vardan Hovsepyan ()
Report other problems with accessing this service to Sune Karlsson () or Helena Lundin ().

Programing by
Design by Joachim Ekebom

Handle: RePEc:hhs:cesisp:0018 This page was generated on 2014-12-14 19:21:53