Strategic R&D with Spillovers, Collusion and Welfare

Steffen Ziss ()

Journal of Industrial Economics, 1994, vol. 42, issue 4, 375-93

Abstract: The author considers a two-stage R&D then output or price duopoly game in which R&D spills over, so reducing the marginal cost of both the investing firm and its rival. The author compares the noncooperative regime to three collusive regimes--joint venture (collusion on R&D), price fixing (collusion at the price or output stage), and merger (collusion at both stages)--and evaluates under what circumstances a collusive regime improves welfare. If spillovers are sufficiently large, all three regimes are beneficial, although mergers are more likely and price-fixing less likely to produce specific benefits than are joint ventures. Copyright 1994 by Blackwell Publishing Ltd.

Date: 1994
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