Advanced Search
MyIDEAS: Login to save this paper or follow this series

Collusion through Joint R&D: An Empirical Assessment

Contents:

Author Info

  • Tomaso Duso

    (Humboldt University Berlin and Wissenschaftszentrum Berlin (WZB))

  • Lars-Hendrik Roeller

    (European School of Management and Technology (ESMT) and Humboldt University Berlin)

  • Jo Seldeslachts

    (University of Amsterdam)

Abstract

This paper tests whether upstream R&D cooperation leads to downstream collusion. We consider an oligopolistic setting where firms enter in research joint ventures (RJVs) to lower production costs or coordinate on collusion in the product market. We show that a sufficient condition for identifying collusive behavior is a decline in the market share of RJV-participating firms, which is also necessary and sufficient for a decrease in consumer welfare. Using information from the US National Cooperation Research Act, we estimate a market share equation correcting for the endogeneity of RJV participation and R&D expenditures. We find robust evidence that large networks between direct competitors -created through firms being members in several RJVs at the same time- are conducive to collusive outcomes in the product market which reduce consumer welfare. By contrast, RJVs among non-competitors are efficiency enhancing.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://papers.tinbergen.nl/10112.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-112/1.

as in new window
Length:
Date of creation: 08 Nov 2010
Date of revision:
Handle: RePEc:dgr:uvatin:20100112

Contact details of provider:
Web page: http://www.tinbergen.nl

Related research

Keywords: Research Joint Ventures; Innovation; Collusion; NCRA;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Spagnolo, Giancarlo, 1999. "On Interdependent Supergames: Multimarket Contact, Concavity, and Collusion," Journal of Economic Theory, Elsevier, vol. 89(1), pages 127-139, November.
  2. Michelle S. Goeree & Eric Helland, 2009. "Do research joint ventures serve a collusive function?," IEW - Working Papers 448, Institute for Empirical Research in Economics - University of Zurich, revised Jul 2012.
  3. M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
  4. Duso, Tomaso & Pennings, Enrico & Seldeslachts, Jo, 2010. "Learning dynamics in research alliances: A panel data analysis," Research Policy, Elsevier, vol. 39(6), pages 776-789, July.
  5. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
  6. Cheung, Francis K., 1992. "Two remarks on the equilibrium analysis of horizontal merger," Economics Letters, Elsevier, vol. 40(1), pages 119-123, September.
  7. Grossman, Gene M & Shapiro, Carl, 1986. "Research Joint Ventures: An Antitrust Analysis," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 315-37, Fall.
  8. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December.
  9. Ralph Siebert & Klaus Gugler, 2004. "Market Power versus Efficiency Effects of Mergers and Research Joint Ventures: Evidence from the Semiconductor Industry," NBER Working Papers 10323, National Bureau of Economic Research, Inc.
  10. Albert Banal-Estañol & Marco Ottaviani, 2006. "Mergers with Product Market Risk," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(3), pages 577-608, 09.
  11. Iwan Bos & Joseph E. Harrington, Jr, 2010. "Endogenous cartel formation with heterogeneous firms," RAND Journal of Economics, RAND Corporation, vol. 41(1), pages 92-117.
  12. Farrell, Joseph & Shapiro, Carl, 1988. "Horizontal Mergers: An Equilibrium Analysis," Department of Economics, Working Paper Series qt0tp305nx, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  13. Roberto Hern·n & Pedro L. MarÌn & Georges Siotis, 2003. "An empirical evaluation of the determinants of Research Joint Venture Formation," Journal of Industrial Economics, Wiley Blackwell, vol. 51(1), pages 75-89, 03.
  14. Tomaso Duso & Damien J. Neven & Lars-Hendrik Röller, 2002. "The Political Economy of European Merger Control: Evidence using Stock Market Data," CIG Working Papers FS IV 02-34, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  15. Dixit, Avinash K, 1986. "Comparative Statics for Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(1), pages 107-22, February.
  16. Bronwyn H. Hall, 1990. "The Manufacturing Sector Master File: 1959-1987," NBER Working Papers 3366, National Bureau of Economic Research, Inc.
  17. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  18. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
  19. Bruno Cassiman & Reinhilde Veugelers, 2002. "R&D Cooperation and Spillovers: Some Empirical Evidence from Belgium," American Economic Review, American Economic Association, vol. 92(4), pages 1169-1184, September.
  20. Suetens, S., 2003. "Does R&D Cooperation Facilitate Price Collusion? An Experiment," Discussion Paper 2003-99, Tilburg University, Center for Economic Research.
  21. Mueller, Dennis C, 1985. "Mergers and Market Share," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 259-67, May.
  22. Ordover, Janusz A & Baumol, William J, 1988. "Antitrust Policy and High-Technology Industries," Oxford Review of Economic Policy, Oxford University Press, vol. 4(4), pages 13-34, Winter.
  23. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, 02.
  24. Thomas W. Ross, 2009. "Sustaining Cooperation with Joint Ventures," Journal of Law, Economics and Organization, Oxford University Press, vol. 25(1), pages 31-54, May.
  25. Brodley, Joseph F, 1990. "Antitrust Law and Innovation Cooperation," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 97-112, Summer.
  26. Fauli-Oller, Ramon, 1997. "On merger profitability in a Cournot setting," Economics Letters, Elsevier, vol. 54(1), pages 75-79, January.
  27. Leonard, William N, 1971. "Research and Development in Industrial Growth," Journal of Political Economy, University of Chicago Press, vol. 79(2), pages 232-56, March-Apr.
  28. Kaz Miyagiwa, 2009. "COLLUSION AND RESEARCH JOINT VENTURES -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 57(4), pages 768-784, December.
  29. Perry, Martin K & Porter, Robert H, 1985. "Oligopoly and the Incentive for Horizontal Merger," American Economic Review, American Economic Association, vol. 75(1), pages 219-27, March.
  30. Banal-Estanol, Albert & Macho-Stadler, Ines & Seldeslachts, Jo, 2008. "Endogenous mergers and endogenous efficiency gains: The efficiency defence revisited," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 69-91, January.
  31. Ramón Faulí-Oller, 1997. "On merger profitability in a cournot setting," Working Papers. Serie AD 1997-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  32. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
  33. Shapiro, Carl & Willig, Robert D, 1990. "On the Antitrust Treatment of Production Joint Ventures," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 113-30, Summer.
  34. Lars-Hendrik Röller & Ralph Siebert & Mihkel M. Tombak, 2007. "Why Firms Form (or do not Form) RJVS," Economic Journal, Royal Economic Society, vol. 117(522), pages 1122-1144, 07.
  35. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
  36. Jorde, Thomas M & Teece, David J, 1990. "Innovation and Cooperation: Implications for Competition and Antitrust," Journal of Economic Perspectives, American Economic Association, vol. 4(3), pages 75-96, Summer.
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 in new window

Cited by:
  1. Subhasish M. Chowdhury & Stephen Martin, 2011. "Innovation Races with the Possibility of Failure," Working Papers 1106, University of Otago, Department of Economics, revised Aug 2011.
  2. Andreoli-Versbach, Patrick & Franck, Jens-Uwe, 2013. "Actions Speak Louder than Words: Econometric Evidence to Target Tacit Collusion in Oligopolistic Markets," Discussion Papers in Economics 16179, University of Munich, Department of Economics.
  3. Daniel Rondeau & Pascal Courty & Maurice Doyon, 2013. "Simultaneous Allocation of Bundled Goods Through Auctions: Assessing the Case for Joint Bidding," CIRANO Working Papers 2013s-37, CIRANO.
  4. Andreoli-Versbach, Patrick & Franck, Jens-Uwe, 2013. "Endogenous Price Commitment, Sticky and Leadership Pricing: Evidence from the Italian Petrol Market," Discussion Papers in Economics 16182, University of Munich, Department of Economics.
  5. Ralph Siebert, 2013. "Are Ex Ante and Ex Post Licensing Agreements Useful Instruments to Lessen Uncertainty in R&D?," CESifo Working Paper Series 4535, CESifo Group Munich.
  6. Michael D. Koenig & Xiaodong Liu & Yves Zenou, 2014. "R&D Networks: Theory, Empirics and Policy Implications," Discussion Papers 13-027, Stanford Institute for Economic Policy Research.
  7. Jeroen Hinloopen & Grega Smrkolj & Florian Wagener, 2013. "In Defense of Trusts: R&D Cooperation in Global Perspective," Tinbergen Institute Discussion Papers 13-045/II, Tinbergen Institute, revised 04 Mar 2014.
  8. Tannista Banerjee & Ralph Siebert, 2014. "The Impact of R&D Cooperations on Drug Variety Offered on the Market. Evidence from the Pharmaceutical Industry," CESifo Working Paper Series 4567, CESifo Group Munich.
  9. Tannista Banerjee & Stephen Martin, 2013. "Pharmaceutical regulation and innovative performance: a decision-theoretic model," Auburn Economics Working Paper Series auwp2013-21, Department of Economics, Auburn University.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:dgr:uvatin:20100112. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antoine Maartens (+31 626 - 160 892)).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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