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Keywords:

Social Sciences, Economics, Business & Economics, Bertrand competition, Cournot competition, cooperative R&D, efficiency, RESEARCH JOINT VENTURES, ENDOGENOUS SPILLOVERS, KNOWLEDGE SPILLOVERS, DEVELOPMENT DUOPOLY, INDUSTRY, INCENTIVES, EFFICIENCY, RETURNS, 14 Economics, 3801 Applied economics, 3802 Econometrics, 3803 Economic theory

Abstract:

Building on the framework developed by Qiu (1997) we investigate the influence of product market competition on incentives to invest in cooperative R&D. For that we disentangle the three components that make up the combined-profits externality. The strategic component is always negative and the size component is always positive. The spillover component is negative (positive) with Bertrand (Cournot) competition. Cournot competition thus yields more cooperative R&D, which could drive the Cournot-Nash price below the Bertrand-Nash price. Our decomposition also explains why, under Cournot competition, cooperative R&D exceeds non-cooperative R&D only if spillovers are "high enough.". Copyright © 2011 The Berkeley Electronic Press. All rights reserved.