TITLE:
Market Share Restrictions and Efficiency
AUTHORS:
Caglar Yurtseven
KEYWORDS:
Market Share, Cost Reduction, R&D, Cournot
JOURNAL NAME:
Modern Economy,
Vol.6 No.12,
December
7,
2015
ABSTRACT: This paper studies the
effects of market share restrictions on research and development activities of
firms. Market share of firms is closely followed by regulatory authorities and
restrictions are applied in many cases around the world. This essay
investigates if these restrictions affect the cost reduction based R&D
efforts of the firms in a market. The question asked is important in the sense
that countries with different regulations on market share, end up having
different innovative structures, which in turn affect their economic growth and
well-being. The paper uses a Cournot model, which shows that under the no exit
assumption, market share restrictions lower the level of competition and
possible rewards from R&D efforts, therefore causing smaller levels of
R&D efforts both for big and small firms in the market.