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Product Market Competition and Investments in Cooperative R&D

Author

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  • Hinloopen Jeroen

    () (University of Amsterdam)

  • Vandekerckhove Jan

    () (Maastricht University)

Abstract

Building on the framework developed by Qiu (1997) we investigate the influence of product market competition on incentives to invest in cooperative R&D. For that we disentangle the three components that make up the combined-profits externality. The strategic component is always negative and the size component is always positive. The spillover component is negative (positive) with Bertrand (Cournot) competition. Cournot competition thus yields more cooperative R&D, which could drive the Cournot-Nash price below the Bertrand-Nash price. Our decomposition also explains why, under Cournot competition, cooperative R&D exceeds non-cooperative R&D only if spillovers are “high enough.”

Suggested Citation

  • Hinloopen Jeroen & Vandekerckhove Jan, 2011. "Product Market Competition and Investments in Cooperative R&D," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-25, September.
  • Handle: RePEc:bpj:bejeap:v:11:y:2011:i:1:n:55
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    References listed on IDEAS

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    Cited by:

    1. Ruble, Richard & Versaevel, Bruno, 2014. "Market shares, R&D agreements, and the EU block exemption," International Review of Law and Economics, Elsevier, vol. 37(C), pages 15-25.
    2. 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.

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