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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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    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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