Endogenous asymmetry and cooperative R&D in linear duopoly with spillovers

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Abstract

In a standard model of R&D followed by linear Cournot competition, firm asymmetryis sustainable as equilibrium with non cooperative R&D if and only if theproductivity of research is sufficiently large relative to the benefits of imitation. Increasingspillovers distribute R&D results among asymmetric competitors, causingprice, firm asymmetry, and joint profit to reduce. With zero spillovers, a symmetricjoint lab dominates asymmetric R&D competition in terms of social welfare and consumersurplus, but is sometimes dominated in terms of joint profit. Raising spilloversencourage symmetric collusion but makes the latter potentially harmful to consumers.(JEL : C72; L13; O32).
Lingua originaleEnglish
pagine (da-a)579-597
Numero di pagine19
RivistaJournal of Institutional and Theoretical Economics
Volume165
Stato di pubblicazionePublished - 2009

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Spillover
Duopoly
Profit
Asymmetry
Social welfare
Cournot competition
Imitation
Competitors
Collusion

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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abstract = "In a standard model of R&D followed by linear Cournot competition, firm asymmetryis sustainable as equilibrium with non cooperative R&D if and only if theproductivity of research is sufficiently large relative to the benefits of imitation. Increasingspillovers distribute R&D results among asymmetric competitors, causingprice, firm asymmetry, and joint profit to reduce. With zero spillovers, a symmetricjoint lab dominates asymmetric R&D competition in terms of social welfare and consumersurplus, but is sometimes dominated in terms of joint profit. Raising spilloversencourage symmetric collusion but makes the latter potentially harmful to consumers.(JEL : C72; L13; O32).",
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