DISCLOSING VERSUS WITHHOLDING TECHNOLOGY KNOWLEDGE IN A DUOPOLY*

Emanuele Bacchiega and Paolo Garella

Manchester School, 2008, vol. 76, issue 1, 88-103

Abstract: We study firms’ incentives to transfer knowledge about production technology to a rival in a Cournot duopoly. In a setting where two technologies are available, a technology is characterized by its associated cost function and no single technology is strictly superior to the other. A firm has superior information if it knows both techniques and the other only one. Cost efficiency may be ‘reversed’ after the voluntary disclosure, so that the rival's costs are improved at the equilibrium level of output. Adding R&D investments to the picture, we find that a firm can decide to invest just for the purpose of acquiring knowledge that will be transferred and not used. Furthermore, for the same point in the parameter space, the acquisition of full knowledge may occur or not as a function of the initial distribution of information.

Date: 2008
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