Product Quality and Market Structure
Volume: Volume 13, No. 1
Issue: Spring 1982
Pages: pp. 133-142
Authors: Takeo Nakao
Title: Product Quality and Market Structure
Abstract: This article studies the relationship between the level of product quality and the structure of an industry under fully dynamic conditions, in which innovations are assumed to take place successively. We extend the Nerlove-Arrow-Gould model of advertising behavior of a monopolist to the R&D activity of oligopolists under the Cournot-type assumption and the limited joint profit-maximization hypothesis. The comparative static results show that an increase in the number of oligopolists lowers the pace of improvements in the industry's average product quality. But within the context of our model there is no definite relationship between the number of oligopolists and the R&D expenditure-sales ratio.
JEL Classification
Microeconomics Theory of Firm and Industry under Imperfectly Competitive Market Structures (0226)
Market Structure: Industrial Organization and Corporate Strategy (6110)
Technological Change; Innovation; Research and Development: General (6210)