R&D Cooperation of Firms and Product Market Competition: An Overview

Jacek Prokop ()

Chapter Chapter 2 in Advances in Empirical Economic Research, 2023, pp 27-36 from Springer

Abstract: Abstract The objective of this chapter is to provide an overview of research on the relationship between the cooperation of firms at the R&D stage and the competition on the final product market. We consider the R&D investments aimed at reducing unit manufacturing costs. Such investments generate positive externalities for industry participants. The analysis is conducted in a two-stage game with companies as players. In the first stage, the firms simultaneously decide about the R&D expenditures, and in the second stage, they meet in the final product market. Several possible scenarios for the behavior of firms in the final product market are considered: (1) the Cournot competition, (2) the Stackelberg leader-follower scheme, and (3) the price-leadership setting. The comparison is made between the case of a duopolistic competition and the situation of a cartelized industry under various assumptions regarding the cost functions and the level of product differentiation. The role of the extent of research spillovers in this context is considered. Numerical analysis shows that a closer cooperation between rivals at the R&D stage in most of the cases strengthens the incentives to create a cartel in the final product market. Thus, significant antitrust issues emerge.

Keywords: R&D investments; Research externalities; Process innovation; Duopolistic competition; Industry cartelization (search for similar items in EconPapers)
JEL-codes: L11 L13 L41 O31 O32 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-031-22749-3_2

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DOI: 10.1007/978-3-031-22749-3_2

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