Transport costs and investment in R&D in the duopoly model

We examined the role of investment in R&D to reduce the transport cost as part of a duopoly. The cost of transport plays an important role in the activity of the firm. It prevents to reach all of its products to consumers. This distance between distributor and consumers was largely modeled as horizontal or vertical differentiation. In our model, this distance is modeled by the proportion of products shipped to consumers as part of a duopoly. This shortfall may be offset by investments in R&D to reduce this distance. The strategic interaction between the two firms is expressed in terms of strategic two-stage game. The firm initially chosen to invest in R&D after it determines the amount of output that maximizes profit in non-cooperative play. The symmetric or asymmetric outcome of the game depends mainly on the efficiency of investment in R&D.