Consumers Win Big as Firms Compete on Quantity over Price in Differentiated Markets
This study looks at how different types of products impact research and development (R&D) networks. The researchers discovered that when companies make goods that work well together or are not related, spending on R&D, prices, profits, and overall well-being are better when companies compete on price rather than quantity. But when goods can replace each other, companies spend more on R&D and make more profit when they compete based on quantity. When goods can replace each other and are quite different, the way they compete affects overall welfare. If the products are very different and companies work together a lot, it's best for them to compete in a way called Cournot. This is especially true if the network of companies is close-knit, with many partnerships compared to the total number of businesses in the market.