Cooperation vs. competition in R & D: the role of stability of equilibrium

Publisher:
Springer-Verlag Wien
Publication Type:
Journal Article
Citation:
Journal of Economics, 1998, 67 (1), pp. 63 - 73
Issue Date:
1998-01
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We consider a model in which firms first choose process R&D expenditures and then compete in an output market. We show the symmetric equilibrium under R&D competition is sometimes unstable, in which case two asymmetric equilibria must also exist. For the latter, we find, in contrast to the literature that total profits are sometimes higher with R&D competition than with research joint venture cartelization (due to the cost asymmetry of the resulting duopoly in the noncooperative case). Furthermore, these equilibria provide another instance of R&D-induced firm heterogeneity.
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