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R&D Cooperation of Firms and Product Market Competition: An Overview

In: Advances in Empirical Economic Research

Author

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  • Jacek Prokop

    (Department of Business Economics, SGH Warsaw School of Economics)

Abstract

The objective of this chapter is to provide an overview of research on the relationship between the cooperation of firms at the R&D stage and the competition on the final product market. We consider the R&D investments aimed at reducing unit manufacturing costs. Such investments generate positive externalities for industry participants. The analysis is conducted in a two-stage game with companies as players. In the first stage, the firms simultaneously decide about the R&D expenditures, and in the second stage, they meet in the final product market. Several possible scenarios for the behavior of firms in the final product market are considered: (1) the Cournot competition, (2) the Stackelberg leader-follower scheme, and (3) the price-leadership setting. The comparison is made between the case of a duopolistic competition and the situation of a cartelized industry under various assumptions regarding the cost functions and the level of product differentiation. The role of the extent of research spillovers in this context is considered. Numerical analysis shows that a closer cooperation between rivals at the R&D stage in most of the cases strengthens the incentives to create a cartel in the final product market. Thus, significant antitrust issues emerge.

Suggested Citation

  • Jacek Prokop, 2023. "R&D Cooperation of Firms and Product Market Competition: An Overview," Springer Proceedings in Business and Economics, in: Nicholas Tsounis & Aspasia Vlachvei (ed.), Advances in Empirical Economic Research, chapter 0, pages 27-36, Springer.
    • Handle: RePEc:spr:prbchp:978-3-031-22749-3_2
    DOI: 10.1007/978-3-031-22749-3_2
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    More about this item

    Keywords

    R&D investments; Research externalities; Process innovation; Duopolistic competition; Industry cartelization;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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