Economic Analysis on Yield Rate Improvement R%D(1/2)

In the real world, yield rate is one of the critical issues of the firms’ competitiveness. In the past literatures, however, we have not found theorem literatures discuss this issue. Therefore, we prepare to study this issue in deep.In the first year, we will establish a basic analysis structure. That is, we will construct a model with a simple vertically related market to discuss when downstream firm decides to undertake the improving yield rate of R&D. Given the upstream price, there exists a possibility that downstream firms’ R&D investment won’t decreases while its R&D cost is increasing. This finding will affect the endogenous of upstream pricing decision. That is, we predict the price of intermediate goodswill be higher or lower that without R&D. Furthermore, we predict the effect on social welfare is also ambiguous while the R&D cost increase.In the second year, we extend our first year program. We will discuss the cooperative and non-cooperative R&D strategies under downstream duopoly. Traditional R&D literatures show that upstream firm will gain from increasing of downstream firms’ number and a higher level of R&D competiveness. However, the results will be different under improving yield rate of R&D. When downstream firm undertake the improving yield rate of R&D which will cause the derived demand decreases, that is, the traditional effect will be different in yield rate R&D issues. We also interesting in the effects of improving on yield rate of R&D on social welfare under cooperative and non-cooperative R&D. Furthermore, we will compare the optimal level of investment under social optimal point of view and cooperative and non-cooperative R&D scenarios.In the last year, we will analyze the interaction of downstream firms’ R&D behavior and upstream firms’ pricing strategies. The previous literatures found that firms will gain from vertically integrated behavior due to endogenous the cost of intermediate goods under downstream Cournot duopoly. Therefore, we plan to discuss the asymmetric market structure with a vertically integrated firm. We will begin our analysis with a simple market which only exists a vertically integrated monopoly and vertically separated monopoly case. Further, we extend the model with a new entry firm under vertically integrated firm exist. In the end, we apply our model to the upstream and downstream duopolistic market in the presence of a vertically-integrated firm.