R&D Activities in Oligopoly and Social Welfare (original) (raw)
Related papers
Product market competition, R&D, and welfare
Research in Economics, 2002
We compare the subgame perfect equilibrium emerging in four regimes of research and development (R&D) competition between duopolists: (i) full competition, (ii) coordination of research strategies, (iii) joint venture with cross licensing of patents, and (iv) full collusion in R&D and the product market. The outcome of the firms' interaction depends on the interplay of the degree of product market
Competition and innovation with horizontal R&D spillovers
Journal of Economic Studies, 2017
Purpose The purpose of this paper is to extend a theoretical framework for analyzing competition and innovation in the presence of horizontal spillovers. Design/methodology/approach A theoretical analysis approach is adopted to drive the paper’s findings. Findings It is shown that when firms behave non-cooperatively in both the R&D and production stages, the degree of spillover has a negative relationship with the effective and respective R&D expenditures of each firm as well as the level of social welfare. An inverted-U relationship between competition and social welfare also holds. When firms behave cooperatively in the R&D stage, and non-cooperatively in the production stage the relationship between the R&D expenditure of the joint research lab and the number of firms in the market is negative. Originality/value In the literature on R&D spillovers and process innovation, efforts are mostly focused on the comparative R&D expenditures and the relative social welfare between non-coo...
Public Policy towards R&D in a Mixed Duopoly with Spillovers
2006
Abstract This paper investigates the use of subsidies to R&D, both in a mixed and a private oligopoly markets. We show that the socially optimal subsidy is positive and increasing in the degree of spillovers in both the private and the mixed duopoly, although it is lower for the former than for the latter. We also find support for the empirical claim that privatisation is followed by a scaling down of the R&D activity.
Cooperation and Competition in a Duopoly R&D Market
In a general setting with uncertainty and spillovers in R&D activity, we consider the incentive to cooperate among firms at any or all of the following three stages. Firms can jointly agree on the level of R&D expenditures, they can set up joint research facilities, and/or they can engage in an information sharing agreements, by which they agree to share any findings with the other firm. We compare expenditures on R&D, profit levels, and welfare levels across the different possible cooperative and competitive setups and offer antitrust implications. Our model differs from previous analyses in three important ways. First, most studies consider only research aimed at lowering production costs, and therefore consider only situations where total profits fall as spillovers increase. We allow for the possibility of product innovation, and define the concepts of offsetting spillovers (falling total profits) and incremental spillovers (when total profits increase as spillovers increase). Se...
2016
The paper extends a theoretical framework for analyzing competition and innovation in presence of horizontal spillovers. Introducing two scenarios, it is shown that when firms behave non-cooperatively in both the R&D and production stages the degree of spillover has a negative relationship with the effective and respective R&D expenditures of each firm as well as the level of social welfare. When firms behave cooperatively in the R&D stage, and non-cooperatively in the production stage the relationship between the R&D expenditure of the joint research lab and the number of firms in the market is negative.
Downstream R&D Rivalry with Spillovers and Discriminatory Input Pricing
Australian Economic Papers, 2008
This paper examines how discriminatory input pricing by the upstream monopolist affects the R&D choices of downstream duopolists in the presence of R&D spillovers. We show that the monopoly supplier can benefit from a precommitment to uniform pricing because under uniform pricing the downstream firms invest more in R&D, leading to larger output and thus benefiting the supplier. When R&D spillovers are sufficiently large, the downstream firms are also better off under uniform pricing. Moreover, social welfare is always higher under uniform pricing. I. I n t r o d u c t i o n This paper combines the literature on R&D choices and input-market price discrimination in an analysis of how the profits of the upstream and downstream firms and social welfare are affected by R&D spillovers, R&D investment, and input pricing schemes. R&D spillovers are frequently invoked in empirical and theoretical research related to R&D, and the existing literature has shown that R&D spillovers are prevalent and pivotal. The paper is related to the literature on R&D competition and/or cooperation in oligopoly with R&D spillovers, mainly focused on how R&D efforts are affected by the level of R&D spillovers. 1 More explicitly, the focus of the paper is on strategic R&D investment games and on process innovation to reduce production costs. In a seminal paper, d'Aspremont and Jacquemin (1988), henceforth AJ, show that cooperative R&D levels exceed non-cooperative R&D levels when the degree of spillovers exceeds 0.5, and vice versa. Many subsequent papers have adopted their framework with modifications to analyse other related issues. For example, Kamien et al. (1992), henceforth KMZ, extend the AJ model to more firms than two, a general concave R&D production function, differentiated products, and Bertrand price completion; 2 Suzumura (1992) extends the AJ model to general demand function. There are also many papers considering different issues, such as product innovation, vertical cooperation, international research joint venture, and absorptive capacity. 3
Cooperation and competition in an R&D market with spillovers
Ssrn Electronic Journal, 2003
In a general setting with uncertainty and spillovers in R&D activity, we consider the incentive to cooperate among firms at any or all of the following three stages. Firms can jointly agree on the level of R&D expenditures, they can set up joint research facilities, and/or they can engage in an information sharing agreements, by which they agree to share any findings with the other firm. We compare expenditures on R&D, profit levels, and welfare levels across the different possible cooperative and competitive setups and offer antitrust implications. Our model differs from previous analyses in three important ways. First, most studies consider only research aimed at lowering production costs, and therefore consider only situations where total industry profits fall as spillovers increase. We allow for the industry profits to increase, and define the concepts of offsetting spillovers (falling total profits) and incremental spillovers (when total profits increase as spillovers increase). Second, we consider a wider variety of cooperation possibilities than do most prior studies. Finally, we use far more general functional forms than is usual in the literature.
Cooperation and competition in an R&D market with spillovers
Research in Economics, 2005
In a general setting with uncertainty and spillovers in R&D activity, we consider the incentive to cooperate among firms at any or all of the following three stages. Firms can jointly agree on the level of R&D expenditures, they can set up joint research facilities, and/or they can engage in an information sharing agreements, by which they agree to share any findings with the other firm. We compare expenditures on R&D, profit levels, and welfare levels across the different possible cooperative and competitive setups and offer antitrust implications. Our model differs from previous analyses in three important ways. First, most studies consider only research aimed at lowering production costs, and therefore consider only situations where total industry profits fall as spillovers increase. We allow for the industry profits to increase, and define the concepts of offsetting spillovers (falling total profits) and incremental spillovers (when total profits increase as spillovers increase). Second, we consider a wider variety of cooperation possibilities than do most prior studies. Finally, we use far more general functional forms than is usual in the literature.
Price vs Quantity in a Duopoly with Technological Spillovers: A Welfare Re-Appraisal
Keio economic studies, 2000
We analyse the problem of the choice of the market variable in a model where firms activate RD and (ii) there exists a set of the relevant parameters where a benevolent social planner prefers quantity setting to price setting. This happens when the marginal cost of R&D activities is relatively low while technological externalities are relatively high. In this situation, the conflict between social and private preferences over the type of market behaviour disappears.