 Spillovers, disclosure lags, and incentives to innovate. Do oligopolies over-invest in R&D?Gianluca Femminis and Gianmaria Martini No 706, Working Papers from Department of Management, Information and Production Engineering, University of Bergamo Abstract: We develop a dynamic duopoly, where firms have to take into account a technological externality, that reduces over time their innovation costs, and an inter-firm spillover, that lowers only the second comer's R&D cost. This spillover exerts its effect after a disclosure lag. We identify three possible equilibria, which are classified, according to the timing of R&D investments, as early, intermediate, and late. The intermediate equilibrium is subgame perfect for a wide parameters range. When the innovation size is large, it implies that the duopolistic market equilibrium involves underinvestment. Hence, even in presence of a moderate degree of inter-firms spillover, the competitive equilibrium calls for public policies aimed at increasing the research activity. When we focus on minor innovations - the case in which, according to the earlier literature, the market equilibrium underinvests - our results imply that the policies aimed at stimulating R&D have to be less sizeable than suggested before, despite the presence of an inter-firm spillover. Keywords: R&D; knowledge spillover; dynamic oligopoly (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:brh:wpaper:0706 Access Statistics for this paper More papers in Working Papers from Department of Management, Information and Production Engineering, University of Bergamo Contact information at EDIRC. |
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