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On R&D information sharing and merger

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  • Sinha, Uday Bhanu

Abstract

The paper deals with the interaction of sharing cost information and merger in a Cournot duopoly. We show that an innovating firm would share information about the cost realization with its rival provided the market size is relatively small or, the R&D technology is relatively more efficient in a medium market size. However, in a large market, or in a medium market size with less efficient R&D technology, the innovating firm does not share information with its rival. In equilibrium whether information sharing occurs or not, merger is always formed. We find that the social welfare may be higher under incomplete information regime. We also establish the role of trade association in facilitating merger through information exchange.

Suggested Citation

  • Sinha, Uday Bhanu, 2013. "On R&D information sharing and merger," Economic Modelling, Elsevier, vol. 32(C), pages 369-376.
  • Handle: RePEc:eee:ecmode:v:32:y:2013:i:c:p:369-376
    DOI: 10.1016/j.econmod.2013.02.029
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    1. Larry D. Qiu & Shengzu Wang, 2011. "FDI Policy, Greenfield Investment and Cross‐border Mergers," Review of International Economics, Wiley Blackwell, vol. 19(5), pages 836-851, November.
    2. Eicher, Theo & Kang, Jong Woo, 2005. "Trade, foreign direct investment or acquisition: Optimal entry modes for multinationals," Journal of Development Economics, Elsevier, vol. 77(1), pages 207-228, June.
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    5. Sinha, Uday Bhanu, 2013. "On R&D information sharing and merger," Economic Modelling, Elsevier, vol. 32(C), pages 369-376.
    6. William Novshek & Hugo Sonnenschein, 1982. "Fulfilled Expectations Cournot Duopoly with Information Acquisition and Release," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 214-218, Spring.
    7. Horn, Henrik & Persson, Lars, 2001. "The equilibrium ownership of an international oligopoly," Journal of International Economics, Elsevier, vol. 53(2), pages 307-333, April.
    8. Jensen, Richard, 1993. "Sharing Cost Information: A Counterexample," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(3), pages 589-592, July.
    9. Kit Pong Wong & Tse, Maurice K. S., 1997. "Mergers and investments in cost reduction with private information revisited," International Journal of Industrial Organization, Elsevier, vol. 15(5), pages 629-634, August.
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    16. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 98(2), pages 185-199.
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    Cited by:

    1. Sinha, Uday Bhanu, 2013. "On R&D information sharing and merger," Economic Modelling, Elsevier, vol. 32(C), pages 369-376.
    2. repec:eee:ecmode:v:68:y:2018:i:c:p:229-238 is not listed on IDEAS

    More about this item

    Keywords

    Information sharing; Trade association; Market size; R&D; Merger; Welfare;

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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