Research Joint Ventures And Product Innovation: Some Welfare Aspects
This paper considers a model of horizontal and vertical product differentiation. Firms spending on R&D may improve the quality of their product. K&D cooperation in the fort11 of a RJV among a subset of innovating firms introduces the possibility of a much better product being produced relative to the case of non-cooperation in K&D. Given Bertrand competition in the product market the RJV sets a common price for the improved good. It is shown that. even under this extreme form of cooperation, there are clear instances where social welfare is enhanced relative to the non-cooperative outcome.
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Volume (Year): 5 (1997)
Issue (Month): 1 ()
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