R&D Equilibrium Strategies with Surfers

F. Ben Abdelaziz (), M. Ben Brahim () and Georges Zaccour
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F. Ben Abdelaziz: University of Tunis
M. Ben Brahim: University of Tunis

Journal of Optimization Theory and Applications, 2008, vol. 136, issue 1, No 1, 13 pages

Abstract: Abstract A typical assumption in the game-theoretic literature on research and development (R&D) is that all firms belonging to the industry under investigation pursue R&D activities. In this paper, we assume that the industry is composed of two groups; the first (the investors) is made of firms that have R&D facilities and are involved in this type of activity. The second group corresponds to firms that are inactive in R&D (the surfers). The latter group benefits from its competitors’ R&D efforts, thanks to involuntary spillovers. This division of the industry is in line with actual practice, where indeed not all firms are engaged in costly and risky R&D. We adopt a two-stage game formalism where, in the first stage investors decide on their levels of investment in R&D, and in the second stage all firms compete à la Cournot in the product market. We characterize and analyze the unique subgame perfect Nash equilibrium.

Keywords: R&D; Two-stage games; Spillovers; Cournot competition (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10957-007-9289-7

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