R&D Equilibrium Strategies with Surfers
- 101 Downloads
A typical assumption in the game-theoretic literature on research and development (R&D) is that all firms belonging to the industry under investigation pursue R&D activities. In this paper, we assume that the industry is composed of two groups; the first (the investors) is made of firms that have R&D facilities and are involved in this type of activity. The second group corresponds to firms that are inactive in R&D (the surfers). The latter group benefits from its competitors’ R&D efforts, thanks to involuntary spillovers. This division of the industry is in line with actual practice, where indeed not all firms are engaged in costly and risky R&D. We adopt a two-stage game formalism where, in the first stage investors decide on their levels of investment in R&D, and in the second stage all firms compete à la Cournot in the product market. We characterize and analyze the unique subgame perfect Nash equilibrium.
KeywordsR&D Two-stage games Spillovers Cournot competition
Unable to display preview. Download preview PDF.
- 1.D’Aspremont, C., Jacquemin, A.: Cooperative and noncooperative R&D in duopoly with spillovers. Am. Econ. Rev. 78, 1133–1137 (1988) Google Scholar
- 2.Kamien, M.I., Muller, E., Zang, I.: Research joint ventures and R&D cartels. Am. Econ. Rev. 82, 1293–1306 (1992) Google Scholar
- 3.Suzumura, S.: Cooperative, and noncooperative R&D in an oligopoly with spillovers. Am. Econ. Rev. 82, 1307–1320 (1992) Google Scholar
- 7.Silipo, D.G.: The economics of cooperation and competition in research and development: a survey. Discussion Paper 37, Dipartimento di Economia e Statistica, Università della Calabria (2003) Google Scholar
- 9.Jaffe, A.B.: Technological opportunity and spillovers of R&D: evidence from firms patents, profits and market value. Am. Econ. Rev. 76, 984–1001 (1986) Google Scholar
- 10.Henriques, I.: Cooperative and noncooperative R&D in duopoly with spillovers: comment. Am. Econ. Rev. 80, 638–640 (1990) Google Scholar
- 14.Arrow, K.J.: Economic welfare and the allocation of resources for inventions. In: Nelson, R.R. (ed.) The Rate and Direction of Incentive Activity. Princeton University Press, Princeton (1962) Google Scholar