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On the prisoner’s dilemma in R&D with input spillovers and incentives for R&D cooperation

  • Burr, Chrystie
  • Knauff, Malgorzata
  • Stepanova, Anna

This paper considers a standard model of strategic R&D with spillovers in R&D inputs, and extends the result that duopoly firms engaged in a standard two-stage game of R&D and Cournot competition end up in a prisoner’s dilemma situation for their R&D decisions, whenever spillover effects and R&D costs are relatively low. In terms of social welfare, this prisoner’s dilemma always works to the advantage of both consumers and society. This result allows a novel and enlightening perspective on some issues of substantial interest in the innovation literature. In particular, the incentive firms face towards R&D cooperation in the form of an R&D cartel is shown to be maximal for the case of zero spillovers, which is when the prisoner’s dilemma has the largest scope.

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Article provided by Elsevier in its journal Mathematical Social Sciences.

Volume (Year): 66 (2013)
Issue (Month): 3 ()
Pages: 254-261

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Handle: RePEc:eee:matsoc:v:66:y:2013:i:3:p:254-261
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