Spillovers and strategic commitment in R&D

Huizhong Liu () and Jingwen Tian ()
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Huizhong Liu: Zhongnan University of Economics and Law
Jingwen Tian: University of Iowa

Theory and Decision, 2024, vol. 96, issue 3, No 6, 477-501

Abstract: Abstract This paper considers a one-stage Cournot duopoly of R&D. We characterize the Nash equilibrium of the one-stage game and provide a comparison with the two-stage version of the same Cournot model of R&D/product market competition. We look at R&D expenditures, profits, output and welfare. Under perfect symmetry, the one-stage model always leads to higher profits when the spillover parameter is not equal to 1/2. Moreover, the one-stage model implies more R&D expenditure and higher welfare if and only if the spillover parameter is greater than 1/2. The insights are robust to an n -firm generalization, but the differences between the one-stage game and the two-stage game disappear as the market becomes perfectly competitive.

Keywords: One-stage game; R&D; Spillovers (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11238-023-09953-9

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