R&D cooperation is reconsidered in situations where firms direct R&D activities towards a new product that cannibalizes the firms' existing products. For soft cannibalization, the welfare-maximizing arrangement between firms involves, for low R&D costs, the formation of a separate entity that independently chooses both the output level of the new good and the level of R&D expenditures and otherwise, joint decisions about R&D but independent decisions about production. Yet, as cannibalization increases, firms find it unprofitable to market the new good unless they collaborate more narrowly. Merger should then be permitted for the socially desirable introduction of the new good.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Queen Mary, University of London, Department of Economics in its series Working Papers with number
413.
Did you know? Citation analysis on IDEAS includes online papers that are freely accessible and whose text could be automatically analyzed, currently about 150000 papers.