R&D-Hindering Collusion

Emanuele Bacchiega, Luca Lambertini () and Andrea Mantovani

The B.E. Journal of Economic Analysis & Policy, 2010, vol. 10, issue 1, 15

Abstract: In an extended version of d'Aspremont and Jacquemin's (1988) R&D competition model, we identify a region where the game is a prisoner's dilemma in that region firms' optimal strategy still prescribes to invest in R&D. However, they would obtain a higher profit by not investing at all. A standard Folk Theorem argument suggests that firms implicitly tend to collude and refrain from investing in R&D when their interaction is repeated. When this happens, social welfare shrinks, but we argue that promoting joint research constitutes a remedy to the lack of innovation efforts, rather than the excess thereof.

Keywords: collusion; process innovation; social welfare (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (5)

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Working Paper: R&D-hindering collusion (2008)
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DOI: 10.2202/1935-1682.2157

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