In an extended version of d'Aspremont and Jacquemin's (1988) R&D competition model, we identify a region where the game is a prisoner's dilemma in that region firms' optimal strategy still prescribes to invest in R&D. However, they would obtain a higher profit by not investing at all. A standard Folk Theorem argument suggests that firms implicitly tend to collude and refrain from investing in R&D when their interaction is repeated. When this happens, social welfare shrinks, but we argue that promoting joint research constitutes a remedy to the lack of innovation efforts, rather than the excess thereof.

This article intends to apply the Nash Bargaining solution to wage setting in a vertically differentiated oligopoly and to study its welfare effects. The market outcome crucially depends on the bargaining power attributed to the agents. I show that the resulting wage bargaining structure is likely to lead to another source of distortion that adds to the classical one derived by oligopoly pricing and quality choice. AbstractThis article intends to apply the Nash Bargaining solution to wage setting in a vertically differentiated oligopoly and to study its welfare effects. The market outcome crucially depends on the bargaining power attributed to the agents. I show that the resulting wage bargaining structure is likely to lead to another source of distortion that adds to the classical one derived by oligopoly pricing and quality choice.

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This paper analyzes the optimal time to introduce a new product in a vertical differentiated market when the delay between innovation and market opening can be shortened through investments whose costs increase, the shorter the desired delay. The timing process is affected by the trade-off between being first and getting monopoly profits, and postponing entry for reducing time-to-market costs. We study the balance of these forces and how this balance is influenced by market structure. In our model, it is possible a priori to observe at the optimal solution both a qualityupgrading equilibrium (first entering the market with the low quality good and then marketing the high quality variant) and quality-downgrading equilibrium (first entering the market with the high quality good and then marketing the low quality variant) while in the existing published literature a quality-upgrading equilibrium is always observed.The authors wish to thank M. L. Guerra, C. Zoli and an anonymous referee for helpful suggestions. 1 They might consist of improving the design cycle or shortening the production cycle time on using high-speed machining.2 Indeed, the higher the reduction to be expected in the time-to-market interval, the higher and the earlier the flow of profits, but also the higher these irreversible costs.

This paper contributes to the literature on distance and quality by identifying a force contributing to explain the observed increase of the quality of shipped goods with the distance of their destination market. This force originates from the influence of distance on firms' strategic behavior when the quality level of goods is a choice variable for them, and complements the ones already proposed in the literature. Our approach differs from the extant literature because it does not rely on technology or preference/income differentials to identify the determinants and drivers of trade flows. Moreover, it allows to clearly disentangle between the price setting and quality choice of firms. We find that distance has an unambiguously positive effect on the average quality of traded goods. Our results suit the empirical evidence on distance and quality and contribute to the analysis of the determinants of firms' trade performance.

We examine a vertically differentiated duopoly where firms invest in process and product innovation and then compete in prices under full market coverage. We show that (i) process and product innovation are complements (substitutes) for the low-quality (high-quality) firm; (ii) the firm which is initially more efficient invests more than the rival in process innovation; (iii) if the initial differential between marginal costs is sufficiently high, the demand for the less efficient firm is nil and the duopoly equilibrium does not exist.

We revisit Maxwell's (1998) analysis to show that MQS regulation has no effects on the high-quality firm's incentive to adopt a more efficient technology in a vertically differentiated duopoly with full market coverage and convex costs of quality improvements which are independent of the scale of production.

In this paper we analyze the private and public incentives towards skill acquisition when the skill level of workers determines the quality level of goods, and both labor and product markets are non competitive. We delve into the mechanisms that determine the equilibrium skill acquisition outcomes and show that both "pure" (training set by either firms or unions only) and "mixed" (training set by firms and unions) training scenarios may emerge at equilibrium. We show that firms have generally greater training incentives than unions, resulting in a higher product quality. In line with empirical evidence, we also find that the wage differential between high-skill workers and low-skill workers is lower when the training levels of the workforce are selected by unions than by firms. Finally, we analyze the optimal public training skill levels and demonstrate that both unions and firms under-invest in training in comparison with the social optimum. Yet, in this case the skill premium is the lowest.