R&D in Duopoly with Spillovers: Evolution and Aspiration Learning

Stepan Cabelka and Jacek Cukrowski
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Stepan Cabelka: CERGE-EI
Jacek Cukrowski: CERGE-EI

Industrial Organization from EconWPA

Abstract: The paper applies the evolutionary concept to an analysis of the role of intellectual property rights protection in the model of two countries North and South (and two firms) where only the Northern firm conducts innovative activity. The concept of social evolution and learning in oligopolistic industries (an aspiration-based model) is developed and the general algorithm of social evolution and aspiration learning for asymmetric duopoly is presented. The evolutionary equilibrium in R&D duopoly with spillovers is presented and analyzed. The results show that strengthening intellectual property rights protection always has negative welfare effects. In particular, it decreases not only the profit (producer surplus) of both the Northern and the Southern firms, but also the consumer surplus in both countries, and, consequently, it lowers social welfare in both countries.

Keywords: Aspiration learning; Social evolution; Research and development; Duopoly; Spillovers (search for similar items in EconPapers)
JEL-codes: L11 L13 O31 O38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-evo and nep-tid
Date: 2001-02-19
Note: Type of Document - Acrobat PDF; pages: 37 ; figures: Included
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpio:0012005

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