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Cooperative and non-cooperative R&D and trade costs

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  • Arghya Ghosh
  • Jonathan Lim

Abstract

We examine the effect of trade liberalization on the level and mode of R&D in an international duopoly setting. Firms have the choice to invest in R&D either independently or cooperatively. A reduction in trade cost increases R&D irrespective of the mode of R&D. However, an increase in spillovers has ambiguous effects on R&D. More precisely, we find that an increase in spillover leads to higher R&D activity under cooperation but lower R&D activity under non-cooperation. Concerning cooperation versus non-cooperation, we find that firms prefer cooperation only if trade costs are low. Consumers are better off under cooperation if spillovers are high. We find that there can be a mismatch between private and social incentives. If spillovers are low and trade costs are low then cooperation might be privately profitable but socially undesirable. On the other hand, if there are large spillovers and high trade costs then cooperation may be socially desirable but not privately profitable.

Suggested Citation

  • Arghya Ghosh & Jonathan Lim, 2013. "Cooperative and non-cooperative R&D and trade costs," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(6), pages 942-958, September.
  • Handle: RePEc:taf:jitecd:v:22:y:2013:i:6:p:942-958
    DOI: 10.1080/09638199.2011.618228
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    File URL: http://hdl.handle.net/10.1080/09638199.2011.618228
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    Citations

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    Cited by:

    1. Takauchi, Kazuhiro, 2015. "Endogenous transport price and international R&D rivalry," Economic Modelling, Elsevier, vol. 46(C), pages 36-43.
    2. Rod Falvey & Khemarat Talerngsri Teerasuwannajak, 2016. "Competitive and Harmonized R&D Policies for International R&D Alliances involving Asymmetric Firms," Review of International Economics, Wiley Blackwell, vol. 24(2), pages 302-329, May.
    3. Ya-Chin Wang, 2016. "R&D Policy Involving Consumer-Friendly Strategy: Cooperative and Non-Cooperative R&D," Journal of Industry, Competition and Trade, Springer, vol. 16(2), pages 257-272, June.
    4. Takauchi, Kazuhiro, 2015. "Transport efficiency, downstream R&D, and spillovers," MPRA Paper 68479, University Library of Munich, Germany.
    5. Takauchi, Kazuhiro, 2016. "Profit-reducing fixed-price contract: The role of the transport sector," MPRA Paper 71413, University Library of Munich, Germany.
    6. Kazuhiro Takauchi & Tomomichi Mizuno, 2017. "Solving a hold-up problem may harm all firms: downstream R&D and transport-price contracts," Discussion Papers 1707, Graduate School of Economics, Kobe University.

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