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Research and Development Cooperatives and Market Collusion: A Global Dynamic Approach

Jeroen Hinloopen (), Grega Smrkolj () and Florian Wagener ()

Journal of Optimization Theory and Applications, 2017, vol. 174, issue 2, No 12, 567-612

Abstract: Abstract We present a continuous-time generalization of the seminal research and development model of d’Aspremont and Jacquemin (Am Econ Rev 78(5):1133–1137, 1988) to examine the trade-off between the benefits of allowing firms to cooperate in research and the corresponding increased potential for product market collusion. We show the existence of a solution to the optimal investment problem using a combination of results from viscosity theory and the theory of planar dynamical systems. In particular, we show that there is a critical level of marginal cost at which firms are indifferent between doing nothing and starting to develop the technology. We find that colluding firms develop further a wider range of initial technologies, pursue innovations more quickly, and are less likely to abandon a technology. Product market collusion could thus yield higher total surplus.

Keywords: Antitrust policy; Bifurcations; Collusion; R&D cooperatives; Spillovers; 91B38; 49N90 (search for similar items in EconPapers)
Date: 2017
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