R&D Investments under Endogenous Cluster Formation

Herbert Dawid and Tim Hellmann
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Herbert Dawid: Center for Mathematical Economics, Bielefeld University

No 555, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: We study investments in R&D and the formation of R&D clusters of firms which are competitors in the market. In a three stage game, firms first decide on long-term R&D investment, then form research clusters according to the unanim- ity game introduced in Bloch(1995), and finally compete in quantities. For some range of investment costs, equilibria with no-investment co-exist with equilibria where a large fraction of firms invest in R&D. Because of the effects of R&D investment on cluster membership, firms tend to over-invest compared to a sce- nario where research clusters are ex-ante fixed and also compared to the welfare optimum.

Keywords: R&D; cluster formation; oligopoly (search for similar items in EconPapers)
Pages: 50
Date: 2016-03-16
New Economics Papers: this item is included in nep-ino
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Citations: View citations in EconPapers (2)

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https://pub.uni-bielefeld.de/download/2901689/2901690 First Version, 2016 (application/x-download)

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Working Paper: R&D Investments under Endogenous Cluster Formation (2017)
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