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Spillovers, disclosure lags, and incentives to innovate. Do oligopolies over-invest in R&D?

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  • Gianluca Femminis

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  • Gianmaria Martini

Abstract

We develop a dynamic duopoly, where .rms have to take into account a technological externality, that reduces over time their innovation costs, and an inter-.rm spillover, that lowers only the second comer.s R&D cost. This spillover exerts its e¤ect after a disclosure lag. We identify three possible equilibria, which are classi.ed, according to the timing of R&D investments, as early, intermediate, and late. The intermedi- ate equilibrium is subgame perfect for a wide parameters range. When the innovation size is large, it implies that the duopolistic market equi- librium involves underinvestment. Hence, even in presence of a mod- erate degree of inter-.rms spillover, the competitive equilibrium calls for public policies aimed at increasing the research activity. When we focus on minor innovations .the case in which, according to the ear- lier literature, the market equilibrium underinvests .our results imply that the policies aimed at stimulating R&D have to be less sizeable than suggested before, despite the presence of an inter-.rm spillover.

Suggested Citation

  • Gianluca Femminis & Gianmaria Martini, 2007. "Spillovers, disclosure lags, and incentives to innovate. Do oligopolies over-invest in R&D?," Working Papers 0706, Department of Economics and Technology Management, University of Bergamo.
  • Handle: RePEc:brh:wpaper:0706
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    References listed on IDEAS

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    Cited by:

    1. Stefano Colombo & Luigi Filippini, 2015. "Patent Licensing with Bertrand Competitors," Manchester School, University of Manchester, vol. 83(1), pages 1-16, January.
    2. Enrico Bellino, 2012. "Pasinetti on Ricardo," DISCE - Quaderni dell'Istituto di Teoria Economica e Metodi Quantitativi itemq1258, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    3. Stefano Colombo & Luigi Filippini, 2012. "Product innovation and logistic optimization in a novel urban-type model," DISCE - Quaderni dell'Istituto di Teoria Economica e Metodi Quantitativi itemq1259, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

    More about this item

    Keywords

    R&D; knowledge spillover; dynamic oligopoly;

    JEL classification:

    • 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
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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