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Sequencing R&D decisions in a two-period duopoly with spillovers

  • Jim Jin


    (Department of Economics, The Queen's University of Belfast, Belfast, BT7 1NN, Northern Ireland, UK)

  • Rabah Amir


    (Department of Economics, University of Southern Denmark, 5230 Odense M, DENMARK)

  • Madjid Amir

    (Department of Statistics and Operations Research, King Saud University, P.O.Box 2455, Riyadh 11451, SAUDI ARABIA)

We compare simultaneous versus sequential moves in R&D decisions within an asymmetric R&D/Cournot model with linear demand (for differentiated products), general R&D costs, and spillovers. Simultaneous play and sequential play (with and without a specified leader) can emerge as appropriate formulations, depending on the ratios of spillover rate over demand cross-slope, but not on R&D efficiency. When at least one ratio is above 1/2, a sequential solution mitigates competition and leads to higher profits for each firm, and to higher social welfare. When uniquely specified, the stronger firm emerges as the R&D first-mover.

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Article provided by Springer in its journal Economic Theory.

Volume (Year): 15 (2000)
Issue (Month): 2 ()
Pages: 297-317

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Handle: RePEc:spr:joecth:v:15:y:2000:i:2:p:297-317
Note: Received: December 8, 1997; revised version: October 25, 1998
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