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Endogenous R&D spillover and location choice in a mixed oligopoly

  • Jianhu Zhang

    ()

  • Changying Li

    ()

We consider a three-stage game where a public firm and a private firm choose R&D, location, and price, under the assumption that R&D spillovers rely on their locations. We show that, in equilibrium, whether the public firm engages in innovation more aggressively than the private firm depends on the degree of spillovers. Moreover, firms’ equilibrium locations exhibit neither maximal nor minimal differentiation. Finally, privatization could reduce social welfare because it may generate inefficient location and insufficient R&D investment. This suggests that a mixed duopoly could be socially preferable to a private duopoly in the presence of endogenous R&D spillovers. Copyright Springer-Verlag Berlin Heidelberg 2013

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File URL: http://hdl.handle.net/10.1007/s00168-013-0556-2
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Article provided by Springer & Western Regional Science Association in its journal The Annals of Regional Science.

Volume (Year): 51 (2013)
Issue (Month): 2 (October)
Pages: 459-477

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Handle: RePEc:spr:anresc:v:51:y:2013:i:2:p:459-477
DOI: 10.1007/s00168-013-0556-2
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