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Annals of Finance

, Volume 15, Issue 1, pp 103–123 | Cite as

Endogenous heterogeneity in duopoly with deterministic one-way spillovers

  • Adriana Gama
  • Isabelle  Maret
  • Virginie MassonEmail author
Research Article
  • 110 Downloads

Abstract

This paper examines the standard symmetric two-period R&D duopoly model, but with a deterministic one-way spillover structure. Though the two firms are ex-ante identical, one obtains a unique pair of asymmetric equilibria of R&D investments, leading to inter-firm heterogeneity in the industry, in R&D roles as well as in unit costs. We analyze the impact of a change in the spillover parameter and R&D costs on firms’ levels of R&D and profits. We find that higher spillovers need not lead to lower R&D investments for both firms. In addition, equilibrium profits may improve due to the presence of spillovers, and it may be advantageous to be the R&D imitator rather than the R&D innovator.

Keywords

One-way spillovers Asymmetric R&D equilibria R&D Symmetry-breaking 

JEL Classification:

D45 L10 C72 

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  • Adriana Gama
    • 1
  • Isabelle  Maret
    • 2
  • Virginie Masson
    • 3
    Email author
  1. 1.Centro de Estudios EconómicosEl Colegio de MéxicoMexico CityMexico
  2. 2.Université de Strasbourg, Université de Lorraine, CNRS, BETAStrasbourgFrance
  3. 3.School of EconomicsThe University of AdelaideAdelaideAustralia

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