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R&D in Duopoly with Spillovers: Evolution and Aspiration Learning

Author

Listed:
  • Stepan Cabelka

    (CERGE-EI)

  • Jacek Cukrowski

    (CERGE-EI)

Abstract

The paper applies the evolutionary concept to an analysis of the role of intellectual property rights protection in the model of two countries North and South (and two firms) where only the Northern firm conducts innovative activity. The concept of social evolution and learning in oligopolistic industries (an aspiration-based model) is developed and the general algorithm of social evolution and aspiration learning for asymmetric duopoly is presented. The evolutionary equilibrium in R&D duopoly with spillovers is presented and analyzed. The results show that strengthening intellectual property rights protection always has negative welfare effects. In particular, it decreases not only the profit (producer surplus) of both the Northern and the Southern firms, but also the consumer surplus in both countries, and, consequently, it lowers social welfare in both countries.

Suggested Citation

  • Stepan Cabelka & Jacek Cukrowski, 2001. "R&D in Duopoly with Spillovers: Evolution and Aspiration Learning," Industrial Organization 0012005, EconWPA.
  • Handle: RePEc:wpa:wuwpio:0012005
    Note: Type of Document - Acrobat PDF; pages: 37 ; figures: Included
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    References listed on IDEAS

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    More about this item

    Keywords

    Aspiration learning; Social evolution; Research and development; Duopoly; Spillovers;

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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