IDEAS home Printed from https://ideas.repec.org/a/bla/manchs/v79y2011i1p81-99.html
   My bibliography  Save this article

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

Author

Listed:
  • 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.

Suggested Citation

  • Rabah Amir & Filomena Garcia & Christine Halmenschlager & Joana Pais, 2011. "R&D As A Prisoner'S Dilemma And R&D‐Avoiding Cartels," Manchester School, University of Manchester, vol. 79(1), pages 81-99, January.
    • Handle: RePEc:bla:manchs:v:79:y:2011:i:1:p:81-99
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/j.1467-9957.2010.02233.x
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Rabah Amir, 2000. "R&D Returns, Market Structure, and Research Joint Ventures," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 156(4), pages 583-583, December.
    2. Jim Y. Jin & Michael Troege, 2006. "R&D Competition And Endogenous Spillovers," Manchester School, University of Manchester, vol. 74(1), pages 40-51, January.
    3. W. Salant, Stephen & Shaffer, Greg, 1998. "Optimal asymmetric strategies in research joint ventures," International Journal of Industrial Organization, Elsevier, vol. 16(2), pages 195-208, March.
    4. Bernstein, Jeffrey I & Nadiri, M Ishaq, 1988. "Interindustry R&D Spillovers, Rates of Return, and Production in High-Tech Industries," American Economic Review, American Economic Association, vol. 78(2), pages 429-434, May.
    5. Martin, Stephen, 1996. "R & D joint ventures and tacit product market collusion," European Journal of Political Economy, Elsevier, vol. 11(4), pages 733-741, April.
    6. Greg Shaffer & Stephen W. Salant, 1999. "Unequal Treatment of Identical Agents in Cournot Equilibrium," American Economic Review, American Economic Association, vol. 89(3), pages 585-604, June.
    7. Jeroen Hinloopen, 2000. "More on subsidizing cooperative and noncooperative R&D in duopoly with spillovers," Journal of Economics, Springer, vol. 72(3), pages 295-308, October.
    8. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-1306, December.
    9. Ruff, Larry E., 1969. "Research and technological progress in a cournot economy," Journal of Economic Theory, Elsevier, vol. 1(4), pages 397-415, December.
    10. Spence, Michael, 1984. "Cost Reduction, Competition, and Industry Performance," Econometrica, Econometric Society, vol. 52(1), pages 101-121, January.
    11. Michael L. Katz, 1986. "An Analysis of Cooperative Research and Development," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 527-543, Winter.
    12. De Bondt, Raymond & Slaets, Patrick & Cassiman, Bruno, 1992. "The degree of spillovers and the number of rivals for maximum effective R &D," International Journal of Industrial Organization, Elsevier, vol. 10(1), pages 35-54, March.
    13. Antonio Tesoriere, 2009. "Endogenous Asymmetry and Cooperative R&D in Linear Duopoly with Spillovers," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 165(4), pages 579-597, December.
    14. Hauenschild, Nils, 2003. "On the role of input and output spillovers when R&D projects are risky," International Journal of Industrial Organization, Elsevier, vol. 21(8), pages 1065-1089, October.
    15. Rabah Amir & John Wooders, 1998. "Cooperation vs. competition in R&D: The role of stability of equilibrium," Journal of Economics, Springer, vol. 67(1), pages 63-73, February.
    16. Katsoulacos, Yannis & Ulph, David, 1998. "Endogenous Spillovers and the Performance of Research Joint Ventures," Journal of Industrial Economics, Wiley Blackwell, vol. 46(3), pages 333-357, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Adam Karbowski, 2020. "A Note on Patents and Leniency," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 1, pages 97-108.
    2. Marco A. Marini & Maria L. Petit & Roberta Sestini, 2014. "Strategic timing in R&D agreements," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 23(3), pages 274-303, April.
    3. 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.
    4. Karbowski, Adam, 2019. "Greed and fear in downstream R&D games," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 32, pages 63-76.
    5. Saha, Souresh, 2014. "Firm's objective function and product and process R&D," Economic Modelling, Elsevier, vol. 36(C), pages 484-494.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Amir, Rabah, 2000. "Modelling imperfectly appropriable R&D via spillovers," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1013-1032, October.
    2. 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.
    3. Anna Stepanova & Antonio Tesoriere, 2011. "R&D With Spillovers: Monopoly Versus Noncooperative And Cooperative Duopoly," Manchester School, University of Manchester, vol. 79(1), pages 125-144, January.
    4. Kaiser, Ulrich, 2002. "An empirical test of models explaining research expenditures and research cooperation: evidence for the German service sector," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 747-774, June.
    5. Adriana Gama & Isabelle Maret & Virginie Masson, 2019. "Endogenous heterogeneity in duopoly with deterministic one-way spillovers," Annals of Finance, Springer, vol. 15(1), pages 103-123, March.
    6. Amir, Rabah & Evstigneev, Igor & Wooders, John, 2003. "Noncooperative versus cooperative R&D with endogenous spillover rates," Games and Economic Behavior, Elsevier, vol. 42(2), pages 183-207, February.
    7. Amir, Rabah & Jin, Jim Y. & Troege, Michael, 2008. "On additive spillovers and returns to scale in R&D," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 695-703, May.
    8. TESORIERE, Antonio, 2005. "Endogenous firm asymmetry and cooperative R&D in linear duopoly with spillovers," LIDAM Discussion Papers CORE 2005086, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Tombak, Mihkel & Röller, Lars-Hendrik & Siebert, Ralph, 2000. "Strategic Choice of Partners: Research Joint Ventures and Market Power," CEPR Discussion Papers 2617, C.E.P.R. Discussion Papers.
    10. Amir, Rabah & Wooders, John, 2000. "One-Way Spillovers, Endogenous Innovator/Imitator Roles, and Research Joint Ventures," Games and Economic Behavior, Elsevier, vol. 31(1), pages 1-25, April.
    11. Antonio Tesoriere, 2015. "Competing R&D joint ventures in Cournot oligopoly with spillovers," Journal of Economics, Springer, vol. 115(3), pages 231-256, July.
    12. Rabah Amir & Niels Nannerup & Anna Stepanova & Eline Eguiazarova, 2002. "Monopoly versus R&D‐integrated Duopoly," Manchester School, University of Manchester, vol. 70(1), pages 88-100, January.
    13. Amir, Rabah & Halmenschlager, Christine & Jin, Jim, 2011. "R&D-induced industry polarization and shake-outs," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 386-398, July.
    14. Silipo, Damiano B., 2008. "Incentives and forms of cooperation in research and development," Research in Economics, Elsevier, vol. 62(2), pages 101-119, June.
    15. L. Lambertini & F. Lotti & E. Santarelli, 2000. "Innovative Output, Infra-Industry Spilloves, and R&D Cooperation: Theory and Evidence," Working Papers 371, Dipartimento Scienze Economiche, Universita' di Bologna.
    16. Kim, Jeong-Eon, 2003. "Three essays on welfare implications of R&D policies in the presence of spillovers," ISU General Staff Papers 200301010800001597, Iowa State University, Department of Economics.
    17. Cellini, Roberto & Lambertini, Luca, 2009. "Dynamic R&D with spillovers: Competition vs cooperation," Journal of Economic Dynamics and Control, Elsevier, vol. 33(3), pages 568-582, March.
    18. Gamal Atallah, 2002. "Vertical R&D Spillovers, Cooperation, Market Structure, and Innovation," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 11(3), pages 179-209.
    19. Tesoriere, Antonio, 2008. "Endogenous R&D symmetry in linear duopoly with one-way spillovers," Journal of Economic Behavior & Organization, Elsevier, vol. 66(2), pages 213-225, May.
    20. Belderbos, Rene & Carree, Martin & Diederen, Bert & Lokshin, Boris & Veugelers, Reinhilde, 2004. "Heterogeneity in R&D cooperation strategies," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1237-1263, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:manchs:v:79:y:2011:i:1:p:81-99. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/semanuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.