Collusion and Research Joint Ventures

Kaz Miyagiwa ()

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: We examine whether cooperation in R&D leads to product market collusion. Suppose that firms engage in a stochastic R&D race while maintaining the collusive equilibrium in a repeated-game framework. Innovation under competitive R&D creates inter-firm asymmetries, which destabilizes the collusive equilibrium. Innovation sharing through cooperative R&D preserves symmetries, thereby facilitating collusion. Sharing an efficient technology also increases industry profit, which contributes to the collusion stability but also raises social welfare. Interestingly, a welfare improvement is less likely if innovation leads to a large cost reduction. The effect of licensing under competition R&D is also examined.

Date: 2007-12
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Journal Article: COLLUSION AND RESEARCH JOINT VENTURES* (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:0704

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