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Innovation Strategies in a Competitive Dynamic Setting

  • Ruslan Lukach
  • Joseph Plasmans
  • Peter M. Kort

This paper presents a dynamic model of a competitive R&D and production duopoly subject to knowledge spillovers. Two asymmetric firms operate for a limited period of time and dispose their knowledge capital in the end. Both firms and the social planner prefer the R&D-cooperative strategy over the competitive one regardless of the intensity of knowledge spillovers. Accumulation of knowledge capital results allows the monopolist to have lower marginal cost of production and charge a lower market price than a fully competitive duopoly. Being able to define the degree of knowledge exchange when creating a research joint venture, the firms do not necessary choose the highest degree of cooperation available.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2005/wp-cesifo-2005-02/cesifo1_wp1395.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1395.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1395
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  1. Andrew Brod & Ram Shivakumar, 1997. "R&D Cooperation and the Joint Exploitation of R&D," Canadian Journal of Economics, Canadian Economics Association, vol. 30(3), pages 673-84, August.
  2. Suzumura, Kotaro, 1992. "Cooperative and Noncooperative R&D in an Oligopoly with Spillovers," American Economic Review, American Economic Association, vol. 82(5), pages 1307-20, December.
  3. W. Salant, Stephen & Shaffer, Greg, 1998. "Optimal asymmetric strategies in research joint ventures," International Journal of Industrial Organization, Elsevier, vol. 16(2), pages 195-208, March.
  4. Kline, J.J., 1998. "Research Joint Ventures and the Cost Paradox," Papers 356, Australian National University - Department of Economics.
  5. AMIR, Rabah & EVSTIGNEEV, Igor & WOODERS, John, 2001. "Noncooperative versus cooperative R&D with endogenous spillover rates," CORE Discussion Papers 2001050, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Reinganum, Jennifer F., 1981. "Dynamic games of innovation," Journal of Economic Theory, Elsevier, vol. 25(1), pages 21-41, August.
  7. Hinloopen, Jeroen, 2000. "Strategic R&D Co-operatives," Research in Economics, Elsevier, vol. 54(2), pages 153-185, June.
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