Joint Venture for Product Innovation and Cartel Stability under Vertical Differentiation

Luca Lambertini () and C. Iori

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: We describe a vertically differentiated market where firms choose between activating either independent ventures leading to distinct product qualities, or a joint venture for a single quality. Then, firms either repeat the one-shot Nash equilibrium forever, or behave collusively, according to discount factors. We prove that there exists a parameter region where the joint venture makes it more difficult for firms to sustain collusive behaviour, as compared to independent ventures. Therefore, public policies towards R&D behaviour should be designed so as not to become inconsistent with the pro-competitive attitude characterising the current legislation on marketing practices.

Date: 2000
New Economics Papers: this item is included in nep-ino and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:385

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