I study a game in which two firms create independent divisions, then they choose whether to do R&D so as to reduce their divisions’ marginal costs, and then the divisions compete in the market. I provide necessary and sufficient conditions under which the game has an equilibrium in pure strategies, and I show that the game has an equilibrium only if each firm threatens that if the rival creates more divisions it will use R&D to foreclose the market. The case we find in the literature, in which firms flood the market with their divisions, should happen only in industries with low returns to R&D.
|Numero di pagine||26|
|Stato di pubblicazione||Published - 2020|
All Science Journal Classification (ASJC) codes
- Sociology and Political Science
- Economics and Econometrics