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R&D-hindering collusion

  • E. Bacchiega
  • L. Lambertini
  • A. Mantovani

In an extended version of d'Aspremont and Jacquemin's (1988) R&D competition model, we identify a region where the game is a prisoner's dilemma in that region firms' optimal strategy still prescribes to invest in R&D. However, they would obtain a higher profit by not investing at all. A standard Folk Theorem argument suggests that firms implicitly tend to collude and refrain from investing in R&D when their interaction is repeated. When this happens, social welfare shrinks, but we argue that promoting joint research constitutes a remedy to the lack of innovation efforts, rather than the excess thereof.

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Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 651.

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Date of creation: Nov 2008
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Handle: RePEc:bol:bodewp:651
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  1. Geroski, P A, 1993. "Antitrust Policy towards Co-operative R&D Ventures," Oxford Review of Economic Policy, Oxford University Press, vol. 9(2), pages 58-71, Summer.
  2. d'Aspremont, Claude & Jacquemin, Alexis, 1990. "Cooperative and Noncooperative R&D in Duopoly with Spillovers: Erratum," American Economic Review, American Economic Association, vol. 80(3), pages 641-42, June.
  3. Friedman, James W, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Wiley Blackwell, vol. 38(113), pages 1-12, January.
  4. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, vol. 39(1), pages 191-225, June.
  5. Kotaro Suzumura, 1990. "Cooperative and Non-cooperative R&D in Oligopoly with Spillovers," Discussion Paper Series a218, Institute of Economic Research, Hitotsubashi University.
  6. d'Aspremont, Claude & Jacquemin, Alexis, 1988. "Cooperative and Noncooperative R&D in Duopoly with Spillovers," American Economic Review, American Economic Association, vol. 78(5), pages 1133-37, December.
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