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Limited Farsightedness in R&D Network Formation

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  • Mauleon, Ana

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

  • Sempere-Monerris, Jose J.

    (University of Valencia)

  • Vannetelbosch, Vincent

    (Université catholique de Louvain, LIDAM/CORE, Belgium)

Abstract

We adopt the horizon-K farsighted set of Herings, Mauleon and Vannetelbosch (2019) to study the R&D networks that will emerge in the long run when firms are neither myopic nor fully farsighted but have some limited degree of farsightedness. We find that a singleton set consisting of a pairwise stable network is a horizon-K farsighted set for any degree of farsightedness K ≥ 2. That is, each R&D network consisting of two components of nearly equal size satisfies both horizon-K deterrence of external deviations and horizon-K external stability for K ≥ 2. On the contrary, each R&D network consisting of two components with the largest one comprising three-quarters of firms, predicted when all firms are fully farsighted, violates horizon-K deterrence of external deviations. Thus, when firms are homogeneous in their degree of farsightedness, pairwise stable R&D networks consisting of two components of nearly equal size are robust to limited farsightedness.

Suggested Citation

  • Mauleon, Ana & Sempere-Monerris, Jose J. & Vannetelbosch, Vincent, 2021. "Limited Farsightedness in R&D Network Formation," LIDAM Discussion Papers CORE 2021006, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2021006
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    More about this item

    Keywords

    Limited farsightedness; Stability; R&D Networks;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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