Cooperation and competition in an R&D market with spillovers." Research in Economics 59(1 (original) (raw)

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 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...

R&D cooperation with asymmetric spillovers

Canadian Journal of Economics/Revue canadienne d'<html_ent glyph="@eacute;" ascii="e"/>conomique, 2005

This paper analyses R&D cooperation with asymmetric spillovers. It is shown that the change in R&D by a firm following cooperation is proportional to the gap between the spillover rate transmitted by that firm and a critical level of spillovers. In consequence, cooperation increases total R&D investments when the average of firms' spillover rates is sufficiently high. Whereas with symmetric spillovers cooperation is always beneficial to firms, with asymmetric spillovers only a very limited range of spillovers makes cooperation beneficial to both firms. Asymmetries also create a potential conflict between maximizing total welfare and maximizing effective cost reduction. JEL classification: L13, O33

The Impact of Market Structure and Learning on the Tradeoff between R&D Competition and Cooperation

The Journal of Industrial Economics, 2013

This paper compares R&D competition and cooperation when firms can devote resources to a 'safe' investment or a risky R&D investment. When the discovery of a new product creates positive externalities on non-discovering firms, equilibrium investment flow, ex ante investment, and welfare under R&D competition are less than or equal to what they are under research cooperation. With negative externalities, R&D cooperation results in the same or lower ex ante investment than under R&D competition, and social welfare may also be less. Our results have relevance for empirical studies of the impact of R&D cooperation on R&D outcomes. *We would like to thank the Editor and two anonymous referees for their extensive and valuable comments on an earlier version of this paper.

A Simple Game-theoretic Framework for studying R&D expenditures and R&D Cooperation

SSRN Electronic Journal, 2000

This paper derives a three stage Cournot duopoly game for research collaboration, research expenditures and product market competition. The amount of knowledge firms can absorb is made dependent on their own research efforts, e.g. firms' absorptive capacity is treated as an endogenous variable. It is shown that cooperating firms invest more in R&D than non-cooperating firms if spillovers are sufficiently large. The degree of market competition is a key determinant of the effects of research cooperation on research efforts, implying that existing models which assume perfect competition might be too restrictive.

Cooperating and Non-cooperating Firms in Inventive and Absorptive Research

Journal of Optimization Theory and Applications, 2012

We consider a duopoly competing in quantity, where firms can invest in both innovative and absorptive R&D to reduce their unit production cost, and where they benefit from free R&D spillovers between them. We analyze the case where firms act non cooperatively and the case where they cooperate by forming a research joint venture. We show that, in both modes of play, there exists a unique symmetric solution. We find that the investment in innovative R&D is always higher than in absorptive R&D. We also find that the value of the learning parameter has almost no impact on innovative R&D, firms profits, consumer's surplus and social welfare. Finally, differences in investment in absorptive research and social welfare under the two regimes are in opposite directions according to the importance of the free spillover.

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.

Cooperative and Noncooperative R&D in Two-Sided Markets

SSRN Electronic Journal, 2000

In this paper, we analyze the impact of cooperation on R&D investments in a two-sided market, where platforms compete in quantities. We show that if indirect externalities are of a moderate magnitude, the threshold degree of spillovers above which cooperation spurs R&D investments and enhances social welfare increases with the degree of externalities. If indirect externalities are of a strong magnitude, cooperation can also be bene…cial in terms of welfare for low degrees of spillovers.