R&D spillovers and cartelization of industries with differentiated products (original) (raw)

Research Joint Ventures Cartelization with Asymmetric R&D Spillovers

The paper analyzes the profitability of R&D cooperation under asymmetric spillovers. It is shown that a firm prefers R&D competition to RJV cartelization when its own spillover rate is low and the spillover rate of its competitor is high. While it prefers R&D cartelization to RJV cartelization when the spillover rate of its competitor is sufficiently high. The equilibrium configuration is RJV cartelization for low spillover asymmetries, R&D competition for intermediate asymmetries, and R&D cartelization for high asymmetries.

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...

In A Model Of Differentiated Duopoly With R&D

2000

We construct a model of differentiated duopoly with process R&D when goods are substitutes. In the first stage firms decide their technologies (i.e., the average costs of production) and in the second stage they compete in quantities or prices. We have shown that not only the Cournot firms invest a larger amount on R&D than the Bertrand firms, but, contrary

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

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.

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 59(1

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)...

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

Leadership Cartels in Industries with Differentiated Products

2001

This article analyses cartels that act as a Stackelberg leader with respect to a competitive fringe in industries supplying di¤erentiated products. The main objectives are to investigate how cartel stability changes with the degree of di¤erentiation and the cartel size, to predict endogenous cartels and to carry out a welfare analysis. Both repeated and static games are considered as well as industries competing in quantities and prices. The results indicate that the degree of stability can be either an increasing, decreasing or non-monotonic function of the degree of product di¤erentiation, depending on the cartel size, the industry size, the competition type and the reaction of cartel loyal members to defection. An endogenous cartel size is also predicted. Other signi…cant results are: some cartels can be sustained under simple static game Nash equilibrium, some cartels may be socially desirable, not all cartels are bene…cial for the fringe members and a free riding problem does not necessarily emerge. JEL classi…cation number: L 13

Cooperative R&D with Endogenous Technology Differentiation

Journal of Economics Management Strategy, 2005

We study a nontournament R&D duopoly. Before the standard R&D investment and quantity-setting stages, we consider a stage in which firms choose their R&D technologies. Spillovers negatively depend on R&D technology differentiation. We show that, in equilibrium, firms will choose identical or very similar R&D processes. Such equilibria may entail less differentiation than would be dictated by social welfare maximization.