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

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  • 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
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    File URL: http://hdl.handle.net/10.1111/j.1467-9957.2010.02233.x
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    References listed on IDEAS

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    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.

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