A contribution to the theory of R&D investments

Domenico Buccella, Luciano Fanti and Luca Gori ()

No 940, GLO Discussion Paper Series from Global Labor Organization (GLO)

Abstract: This research contributes to the theory of cost-reducing R&D investments by offering a tractable three-stage non-cooperative Cournot duopoly game in which R&D-investing firms choose whether to disclose R&D-related information to the rival. Though in a noncooperative context firms have no incentive to unilaterally disclose information on their costreducing R&D activity to prevent the rival from freely appropriate it, this work shows that there is room for the government to design an optimal policy aimed at incentivising unilaterally each owner towards R&D disclosure. Under this welfare improving policy, sharing R&D-related information becomes a Pareto efficient Nash equilibrium strategy of selfish firms. These findings suggest that introducing public subsidies aimed at favouring R&D disclosure represents a win-win result, eliminating the so far established - and unpleasant for both firms and society - non-disclosing outcome.

Keywords: Cost-reducing innovation; Nash equilibrium; Government; Social welfare (search for similar items in EconPapers)
JEL-codes: D43 L13 O31 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-com, nep-gth, nep-isf and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:glodps:940

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