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Advantageous or Disadvantageous Semi-collusion

  • Arijit Mukherjee

    ()

    (Keele University, Department of Economics)

This paper compares profits and consumer surplus under non-cooperation and collusion in the product market when the firms have the option for R&D before production. We show that whether R&D investment would be higher under noncooperation or product market collusion depends on the R&D productivity. If the market size is sufficiently small then firms are always better off under product market collusion. If the market size is moderate (relatively large) then the firms are better off under non-cooperation (semi-collusion) for sufficiently lower pre-innovation costs of production.We also show that in case of moderate (relatively large) market size, firms are better off under non-cooperation for relatively lower (higher) R&D productivity. However, we find that consumer welfare is always higher under non-cooperation in product market compared to collusion in product market.

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File URL: http://www.keele.ac.uk/depts/ec/wpapers/kerp0210.pdf
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Paper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number KERP 2002/10.

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Length: 28 pages
Date of creation: Sep 2002
Date of revision:
Handle: RePEc:kee:kerpuk:2002/10
Contact details of provider: Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom
Phone: +44 (0)1782 584581
Fax: +44 (0)1782 717577
Web page: http://www.keele.ac.uk/depts/ec/cer/
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Order Information: Postal: Centre for Economic Research, Research Institute for Public Policy and Management, Keele University, Staffordshire ST5 5BG - United Kingdom
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