Endogenous heterogeneity in duopoly with deterministic one-way spillovers

Adriana Gama, Isabelle Maret () and Virginie Masson
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Isabelle Maret: Université de Strasbourg, Université de Lorraine, CNRS, BETA

Annals of Finance, 2019, vol. 15, issue 1, No 4, 103-123

Abstract: Abstract This paper examines the standard symmetric two-period R&D duopoly model, but with a deterministic one-way spillover structure. Though the two firms are ex-ante identical, one obtains a unique pair of asymmetric equilibria of R&D investments, leading to inter-firm heterogeneity in the industry, in R&D roles as well as in unit costs. We analyze the impact of a change in the spillover parameter and R&D costs on firms’ levels of R&D and profits. We find that higher spillovers need not lead to lower R&D investments for both firms. In addition, equilibrium profits may improve due to the presence of spillovers, and it may be advantageous to be the R&D imitator rather than the R&D innovator.

Keywords: One-way spillovers; Asymmetric R&D equilibria; R&D; Symmetry-breaking; D45; L10; C72 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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DOI: 10.1007/s10436-018-0329-0

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