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R&D-Hindering Collusion

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  • Bacchiega Emanuele

    ()
    (Università di Bologna)

  • Lambertini Luca

    ()
    (Università di Bologna)

  • Mantovani Andrea

    ()
    (Università di Bologna)

Abstract

In an extended version of d'Aspremont and Jacquemin's (1988) R&D competition model, we identify a region where the game is a prisoner's dilemma in that region firms' optimal strategy still prescribes to invest in R&D. However, they would obtain a higher profit by not investing at all. A standard Folk Theorem argument suggests that firms implicitly tend to collude and refrain from investing in R&D when their interaction is repeated. When this happens, social welfare shrinks, but we argue that promoting joint research constitutes a remedy to the lack of innovation efforts, rather than the excess thereof.

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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 10 (2010)
Issue (Month): 1 (July)
Pages: 1-15

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Handle: RePEc:bpj:bejeap:v:10:y:2010:i:1:n:66

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  1. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, American Economic Association, vol. 78(5), pages 1133-37, December.
  2. d'Aspremont, Claude & Jacquemin, Alexis, 1990. "Cooperative and Noncooperative R&D in Duopoly with Spillovers: Erratum," American Economic Review, American Economic Association, American Economic Association, vol. 80(3), pages 641-42, June.
  3. Geroski, P A, 1993. "Antitrust Policy towards Co-operative R&D Ventures," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 9(2), pages 58-71, Summer.
  4. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, Elsevier, vol. 39(1), pages 191-225, June.
  5. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  6. Kotaro Suzumura, 1990. "Cooperative and Non-cooperative R&D in Oligopoly with Spillovers," Discussion Paper Series, Institute of Economic Research, Hitotsubashi University a218, Institute of Economic Research, Hitotsubashi University.
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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, Elsevier, vol. 66(3), pages 254-261.

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