Competing or Colluding in a Stochastic Environment

Salgado Banda Héctor and Breccia Adriana

No 2005-04, Working Papers from Banco de México

Abstract: This document analyses collusion by innovative firms and the role of patents in a continuous-time real options framework. A patent-investment race model is formulated in which innovative firms bargain and reach collusive agreements. It is shown that, while collusion always delays innovation, it does not necessarily delay competition. Depending on a number of factors, collusion can actually accelerate competition.

JEL-codes: C7 D8 K4 L13 (search for similar items in EconPapers)
Date: 2005-07
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