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Collaboration and Competition in Networks

Author

Listed:
  • Sumit Joshi

    (The George Washington University)

  • Sanjeev Goyal

    (Erasmus University)

Abstract

In a Cournot oligopoly, prior to choosing quantity, each firm has an opportunity to form pair-wise collaborative links with other firms. These pair-wise links lower costs of production of the firms which form a link and, if there are knowledge spillovers, also lower costs of other firms which are connected to them. The collection of pair-wise links defines a collaboration network. We characterize stable networks and compare them with efficient networks. We find that the complete network is stable, irrespective of the assumptions on spillovers across collaboration links. This is in contrast to some recent work on group formation in Cournot oligopoly, see e.g., Bloch (1995). Our finding is also interesting from a welfare point of view since, in such settings, the complete network is efficient from a social point of view.

Suggested Citation

  • Sumit Joshi & Sanjeev Goyal, 1999. "Collaboration and Competition in Networks," Working papers 64, Centre for Development Economics, Delhi School of Economics.
  • Handle: RePEc:cde:cdewps:64
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    File URL: http://www.cdedse.org/pdf/work64.pdf
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    References listed on IDEAS

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    1. Dufour, Jean-Marie, 1982. "Generalized Chow Tests for Structural Change: A Coordinate-Free Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(3), pages 565-575, October.
    2. R. Radhakrishna & C. Ravi, 1992. "Effects of Growth, Relative Price and Preferences on Food and Nutrition," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 27, pages 303-323.
    3. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
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    Cited by:

    1. Goyal, Sanjeev & Joshi, Sumit, 2003. "Networks of collaboration in oligopoly," Games and Economic Behavior, Elsevier, vol. 43(1), pages 57-85, April.

    More about this item

    Keywords

    Networks; Cournot Oligopoly; Spillovers; Coalitions;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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