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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Jim Jin & Rabah Amir & Madjid Amir, 2000. "Sequencing R&D decisions in a two-period duopoly with spillovers," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(2), pages 297-317.
  • 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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    References listed on IDEAS

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    1. Ernst Fehr & Simon Gächter, 2000. "Fairness and Retaliation: The Economics of Reciprocity," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 159-181, Summer.
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    Cited by:

    1. Marco Marini & Giorgio Rodano, 2012. "Sequential vs Collusive Payoffs in Symmetric Duopoly Games," DIAG Technical Reports 2012-06, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    2. Tesoriere, Antonio, 2008. "Endogenous R&D symmetry in linear duopoly with one-way spillovers," Journal of Economic Behavior & Organization, Elsevier, vol. 66(2), pages 213-225, May.
    3. Chiara CONTI, 2013. "Asymmetric information in a duopoly with spillovers: new findings on the effects of RJVs," Departmental Working Papers 2013-04, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    4. Marco Marini & Giorgio Rodano, 2011. "Lead, Follow or Cooperate? Endogenous Timing & Cooperation in Symmetric Duopoly Games," Working Papers 1112, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2011.
    5. TESORIERE, Antonio, 2005. "Endogenous R&D symmetry in linear duopoly with one-way spillovers," CORE Discussion Papers 2005045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. repec:eee:indorg:v:52:y:2017:i:c:p:427-449 is not listed on IDEAS
    7. Alain-Désiré Nimubona & Hassan Benchekroun, 2014. "Environmental R&D in the Presence of an Eco-Industry," Working Papers 1406, University of Waterloo, Department of Economics, revised Sep 2014.
    8. Kretschmer, Tobias & Muehlfeld, Katrin, 2006. "Co-opetition and prelaunch in standard-setting for developing technologies," LSE Research Online Documents on Economics 19843, London School of Economics and Political Science, LSE Library.

    More about this item

    Keywords

    R&D spillovers; Cournot duopoly; Subgame-perfect Equilibrium; Endogenous timing.;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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