Research and Development Cooperatives and Market Collusion: A Global Dynamic Approach

Abstract

We present a continuous-time generalization of the seminal research and development model of d'Aspremont and Jacquemin (Am Econ Rev 78(5): [1133][1134][1135][1136][1137] 1988) to examine the trade-off between the benefits of allowing firms to cooperate in research and the corresponding increased potential for product market collusion. We show the existence of a solution to the optimal investment problem using a combination of results from viscosity theory and the theory of planar dynamical systems. In particular, we show that there is a critical level of marginal cost at which firms are indifferent between doing nothing and starting to develop the technology. We find that colluding firms develop further a wider range of initial technologies, pursue innovations more quickly, and are less likely to abandon a technology. Product market collusion could thus yield higher total surplus.

Imitative innovation or independent innovation strategic choice of emerging economies in non-cooperative innovation competition

“…Bos et al [6] analyzes the nonmonotony of the relationships between various types of innovations throughout the industry life cycle. Henderson and Cockburn [20], Jaffe [21], Hassine et al [2], and more recently Bloom et al [3] conducted empirical studies on spillovers in R&D and found the ambiguous effects of spillovers on innovation. In general, more evidence shows that spillovers benefit imitators and the industry [41].…”

“…Zhou and Wang [46] analyzed the stability of the duopoly game with R&D spillover. Hinloopen et al [21] studied a global dynamic approach to R&D cooperation and market collusion. Fabra and Garcia [13] studied the relationship between dynamic price competition and cost transformation.…”