February 2016
Beginner to intermediate
500 pages
33h 40m
English
A firm may be able to gain a cost advantage over a rival by moving first. Our analysis of the Cournot model in Chapter 11 shows that a firm with a lower marginal cost produces more and earns a higher profit than does its high cost rival. We start by examining two cases where a firm moves first to gain a marginal cost advantage over its rivals by undertaking process innovation or increasing the rate of learning by doing to lower its own marginal cost. Then we consider a firm’s strategic action that raises its rivals’ marginal cost by more than its own.
A firm should invest in a process innovation, which improves the method of production for an existing product, if the resulting ...