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Competing or Colluding in a Stochastic Environment

Author

Listed:
  • Adriana Breccia
  • Héctor Salgado Banda

Abstract

This document analyses collusion by innovative firms and the role of patents in a continuous-time real options framework. A patent-investment race model is formulated in which innovative firms bargain and reach collusive agreements. It is shown that, while collusion always delays innovation, it does not necessarily delay competition. Depending on a number of factors, collusion can actually accelerate competition.

Suggested Citation

  • Adriana Breccia & Héctor Salgado Banda, 2005. "Competing or Colluding in a Stochastic Environment," Working Papers 2005-04, Banco de México.
  • Handle: RePEc:bdm:wpaper:2005-04
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    References listed on IDEAS

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    More about this item

    Keywords

    Bargaining; Collusion; Competition; Geometric Brownian motion; Nash axiomatic approach; Stackelberg game;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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