THE EFFECT OF MARKETING COOPERATIVES ON COST-REDUCING PROCESS INNOVATION ACTIVITY

Solving these best response functions simultaneously, we get the equilibrium levels of innovation:

The total innovation in the mixed duopsony is then:
(33) r = _r + _r = tψ ^{+ x}C(1) ⁽4tψ - 2^{) +} ψ(Pi ^- Pc )

T C I              ψ(4tψ -1)

Plugging r_C^' and r_I^' in the expressions for innovation costs, post-innovation profits, and member welfare,
we get:

`    _[^xC(1) - ψ ⁺ ψ(Pc - pI )]2

I (^2,3) =         2ψ (4 tψ -1)

Price ComPetition at the Pre-Innovation Stage in the Mixed OligoPsony

Unlike the pure oligopsony case, in the mixed duopsony the outcome of price competition in the pre-
innovation stage affects firms’ optimal decisions and payoffs in subsequent stages (see equations (31),
(32), (34) and (35)). Thus, in stage 1 the IOF seeks to determine the input price that maximizes its total
profits (i.e., its profits at the pre-innovation stage plus its profits at the post-innovation stage minus its
innovation costs), i.e.,

The best response function of the IOF is given by:

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