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R&D As A Prisoner'S Dilemma And R&D‐Avoiding Cartels

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  • RABAH AMIR
  • FILOMENA GARCIA
  • CHRISTINE HALMENSCHLAGER
  • JOANA PAIS

Abstract

Duopoly firms engaged in a standard two-stage game of R&D and Cournot competition are caught in a prisoner's dilemma for their R&D decisions whenever spillover effects are low. This effect works to the advantage of consumers and society. This result provides an interesting perspective on the well‐known wedge between private and social incentives for R&D. The prisoner's dilemma is the key effect behind this wedge under low spillovers. The latter take over when sufficiently high, as is widely recognized. This mutually exclusive nature of the prisoner's dilemma and significant spillovers also serves to explain the incentives to form R&D cartels.

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File URL: http://hdl.handle.net/10.1111/j.1467-9957.2010.02233.x
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Bibliographic Info

Article provided by University of Manchester in its journal The Manchester School.

Volume (Year): 79 (2011)
Issue (Month): 1 (January)
Pages: 81-99

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Handle: RePEc:bla:manchs:v:79:y:2011:i:1:p:81-99

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Cited by:
  1. Burr, Chrystie & Knauff, Malgorzata & Stepanova, Anna, 2013. "On the prisoner’s dilemma in R&D with input spillovers and incentives for R&D cooperation," Mathematical Social Sciences, Elsevier, vol. 66(3), pages 254-261.
  2. Marco Marini & Maria Luisa Petit & Roberta Sestini, 2012. "Strategic Timing in R&D Agreements," DIAG Technical Reports 2012-07, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
  3. Saha, Souresh, 2014. "Firm's objective function and product and process R&D," Economic Modelling, Elsevier, vol. 36(C), pages 484-494.

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