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R&D Equilibrium Strategies with Surfers

Author

Listed:
  • F. Ben Abdelaziz

    (University of Tunis)

  • M. Ben Brahim

    (University of Tunis
    University La Mannouba)

  • G. Zaccour

    (Chair in Game Theory and Management, GERAD)

Abstract

A typical assumption in the game-theoretic literature on research and development (R&D) is that all firms belonging to the industry under investigation pursue R&D activities. In this paper, we assume that the industry is composed of two groups; the first (the investors) is made of firms that have R&D facilities and are involved in this type of activity. The second group corresponds to firms that are inactive in R&D (the surfers). The latter group benefits from its competitors’ R&D efforts, thanks to involuntary spillovers. This division of the industry is in line with actual practice, where indeed not all firms are engaged in costly and risky R&D. We adopt a two-stage game formalism where, in the first stage investors decide on their levels of investment in R&D, and in the second stage all firms compete à la Cournot in the product market. We characterize and analyze the unique subgame perfect Nash equilibrium.

Suggested Citation

  • F. Ben Abdelaziz & M. Ben Brahim & G. Zaccour, 2008. "R&D Equilibrium Strategies with Surfers," Journal of Optimization Theory and Applications, Springer, vol. 136(1), pages 1-13, January.
    • Handle: RePEc:spr:joptap:v:136:y:2008:i:1:d:10.1007_s10957-007-9289-7
    DOI: 10.1007/s10957-007-9289-7
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    References listed on IDEAS

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    1. Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, vol. 82(5), pages 1307-1320, December.
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