Optimal Sharing Strategies in Dynamic Games of Research and Development
This paper analyses the dynamic aspects of knowledge sharing in R&D rivalry. In a model where research projects consist of N sequential stages, our goal is to explore how the innovators' incentives to share intermediate research outcomes change with progress and with their relative positions in an R&D race. We consider an uncertain research process, where progress implies a decrease in the level of uncertainty that a firm faces. We assume that firms are informed about the progress of their rivals and make joint sharing decisions either before or after each success. Changes in the firms' absolute and relative positions affect their incentives to stay in the race and the expected duration of monopoly profits if they finish the race first. We show that firms always prefer to have sharing between their independent research units if they are allowed to collude in the product market. However, competing firms may have either decreasing or increasing incentives to share intermediate research outcomes throughout the race. If the lagging firm never drops out, the incentives to share always decrease over time as the research project nears completion. The incentives to share are higher earlier on because sharing has a smaller impact on each firm's chance of being a monopolist at the end of the race. If the lagging firm is expected to drop out, the incentives to share may increase over time. We also use our framework to analyze the impact of patent policy on the sharing incentives of firms and show that as patent policy gets stronger, sharing incentives may decrease or increase depending on whether or not the lagging firm has increased incentives to drop out.
|Date of creation:||Apr 2007|
|Contact details of provider:|| Postal: Department of Justice Antitrust Division 450 Fifth Street NW Washington, DC 20530|
Web page: http://www.justice.gov/atr/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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 1133-1137, December.
- d'ASPREMONT, Claude & JACQUEMIN, Alexis, "undated". "Cooperative and noncooperative R&D in duopoly with spillovers," CORE Discussion Papers RP 823, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Tarun Khanna & Marco Iansiti, 1997. "Firm Asymmetries and Sequential R&D: Theory and Evidence from the Mainframe Computer Industry," Management Science, INFORMS, vol. 43(4), pages 405-421, April.
- Luís M. B. Cabral, 2003. "R&D Competition when firms Choose Variance," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(1), pages 139-150, March.
- James Cardon & Dan Sasaki, 1998.
"Preemptive Search and R&D Clustering,"
RAND Journal of Economics,
The RAND Corporation, vol. 29(2), pages 324-338, Summer.
- James H. Cardon & Dan Sasaki, 1996. "Pre-emptive Search and R&D Clustering," Discussion Papers 96-21, University of Copenhagen. Department of Economics.
- Michael L. Katz & Carl Shapiro, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 567-589.
- Sudipto Bhattacharya & Dilip Mookherjee, 1986. "Portfolio Choice in Research and Development," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 594-605, Winter.
- Sudipto Bhattacharya and Dilip Mookherhee., 1984. "Portfolio Choice in Research and Development," Research Program in Finance Working Papers 147, University of California at Berkeley.
- Henry Wang, X., 2002. "Fee versus royalty licensing in a differentiated Cournot duopoly," Journal of Economics and Business, Elsevier, vol. 54(2), pages 253-266.
- Kenneth L. Judd, 2003. "Closed-loop equilibrium in a multi-stage innovation race," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 21(2), pages 673-695, March.
- Kenneth L. Judd, 1985. "Closed-Loop Equilibrium in a Multi-Stage Innovation Race," Discussion Papers 647, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Vonortas, Nicholas S., 1994. "Inter-firm cooperation with imperfectly appropriable research," International Journal of Industrial Organization, Elsevier, vol. 12(3), pages 413-435, September.
- Reinganum, Jennifer F., 1981. "Dynamic games of innovation," Journal of Economic Theory, Elsevier, vol. 25(1), pages 21-41, August.
- Reinganum, Jennifer F., "undated". "Dynamic Games of Innovation," Working Papers 287, California Institute of Technology, Division of the Humanities and Social Sciences.
- Lerner, Josh & Merges, Robert P, 1998. "The Control of Technology Alliances: An Empirical Analysis of the Biotechnology Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(2), pages 125-156, June.
- Dasgupta, Partha & Maskin, Eric, 1987. "The Simple Economics of Research Portfolios," Economic Journal, Royal Economic Society, vol. 97(387), pages 581-595, September.
- Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
- Suzanne Scotchmer & Jerry Green, 1990. "Novelty and Disclosure in Patent Law," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 131-146, Spring.
- Aghion, P. & Tirole, J., 1993. "On the Management of Innovation," Working papers 93-12, Massachusetts Institute of Technology (MIT), Department of Economics.
- Aghion, Philippe & Tirole, Jean, 1994. "On the Management of Innovation," IDEI Working Papers 36, Institut d'Économie Industrielle (IDEI), Toulouse.
- Choi, Jay Pil, 1993. "Cooperative R&D with product market competition," International Journal of Industrial Organization, Elsevier, vol. 11(4), pages 553-571.
- Nancy T. Gallini, 1992. "Patent Policy and Costly Imitation," RAND Journal of Economics, The RAND Corporation, vol. 23(1), pages 52-63, Spring.
- Kamien, Morton I., 1992. "Patent licensing," Handbook of Game Theory with Economic Applications,in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 11, pages 331-354 Elsevier.
- Aghion, Philippe & Tirole, Jean, 1994. "Opening the black box of innovation," European Economic Review, Elsevier, vol. 38(3-4), pages 701-710, April.
- Tom Lee & Louis L. Wilde, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, Oxford University Press, vol. 94(2), pages 429-436.
- Philippe Aghion & Jean Tirole, 1994. "The Management of Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 109(4), pages 1185-1209.
- Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-1306, December.
- Tor Klette & David de Meza, 1986. "Is the Market Biased Against Risky R&D?," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 133-139, Spring.
- Claude d'Aspremont & Sudipto Bhattacharya & Louis-Andre Gerard-Varet, 2000. "Bargaining and Sharing Innovative Knowledge," Review of Economic Studies, Oxford University Press, vol. 67(2), pages 255-271.Full references (including those not matched with items on IDEAS)