Technology Adoption in a Differentiated Duopoly – Cournot versus Bertrand

Rupayan Pal
JEL codes: 

This paper compares equilibrium technology adoption in a differentiated duopoly under two
alternative modes of product market competition, Cournot and Bertrand. It shows that the
cost of technology has differential impact on technology adoption, that is, on cost-efficiency
of the industry, under two alternative modes of product market competition. The possibility of
ex post cost asymmetry between firms is higher under Bertrand competition than under
Cournot competition. If the cost of technology is high, Bertrand competition leads to higher
cost-efficiency than Cournot competition provided that the cost reducing effect of the
technology is high. On the other hand, if the technology reduces the marginal cost of
production by a very low amount, Cournot competition may lead to higher cost-efficiency
than Bertrand competition.