DOWNSTREAM R&D RIVALRY WITH SPILLOVERS AND DISCRIMINATORY INPUT PRICING

Pei‐cheng Liao

Australian Economic Papers, 2008, vol. 47, issue 4, 376-388

Abstract: This paper examines how discriminatory input pricing by the upstream monopolist affects the R&D choices of downstream duopolists in the presence of R&D spillovers. We show that the monopoly supplier can benefit from a precommitment to uniform pricing because under uniform pricing the downstream firms invest more in R&D, leading to larger output and thus benefiting the supplier. When R&D spillovers are sufficiently large, the downstream firms are also better off under uniform pricing. Moreover, social welfare is always higher under uniform pricing.

Date: 2008
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https://doi.org/10.1111/j.1467-8454.2008.00355.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:ausecp:v:47:y:2008:i:4:p:376-388

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