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<p>We consider a Bertrand duopoly in which firms have the opportunity to invest a fixed sum in process innovation. The decision to invest may take place under two alternative scenarios. In the <i>complete information scenario</i> firms know each other’s costs at the time of investment. In the <i>incomplete information scenario</i> each firm is privately informed of its own cost. We show that the probability that both firms invest in equilibrium may be greater under incomplete information than under complete information. This, moreover, is always the case provided that market demand is sufficiently large.</p>

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Cost Uncertainty and Process Innovation in Bertrand Duopoly

  • 期刊论文

  • 发表日期：

    2026年2月19日

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  • Bruno D. Badia

摘要

We consider a Bertrand duopoly in which firms have the opportunity to invest a fixed sum in process innovation. The decision to invest may take place under two alternative scenarios. In the complete information scenario firms know each other’s costs at the time of investment. In the incomplete information scenario each firm is privately informed of its own cost. We show that the probability that both firms invest in equilibrium may be greater under incomplete information than under complete information. This, moreover, is always the case provided that market demand is sufficiently large.