Question: . Consider two countries denoted by i = 1 , 2 , each of which has one firm producing a homogenous product only for export,
Consider two countries denoted by i each of which has one firm producing a homogenous product only for export, to be sold in the world market. The worlds demand for the product is given by where The preinnovation unit cost of each firm is where Let denote the amount of R&D sponsored by the government in country i When government i undertakes R&D the unit production cost for the firm producing in country i is reduced to The total cost to government i of engaging in R&D at level is : a Assuming that the firms play a Cournot quantity game in the world market for given R&D levels, calculate the equilibrium profit level for firm i of marksb Assuming that country is welfare is given by the sum of the profit earned by firm i minus the cost of R&D calculate the unique Nash equilibrium levels of R&D in country i of marks
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