Endogenous formation of a joint lab in an oligopolistic market: private incentives, collective incentives and welfare

Formation endogène d’un laboratoire commun dans un marché oligopolistique: incitations privées, incitations collectives et bien-être

Razika Sait, Abdelhakim Hammoudi () and Mohammed Said Radjef
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Razika Sait: Unité de recherche LaMOS = Research unit LaMOS - Unité de recherche Laboratoire de Modélisation et Optimisation des Systèmes [Université de Béjaïa] - UB - Université Abderrahmane Mira [Université de Béjaïa] = University of Béjaïa = جامعة بجاية
Abdelhakim Hammoudi: UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement
Mohammed Said Radjef: Unité de recherche LaMOS = Research unit LaMOS - Unité de recherche Laboratoire de Modélisation et Optimisation des Systèmes [Université de Béjaïa] - UB - Université Abderrahmane Mira [Université de Béjaïa] = University of Béjaïa = جامعة بجاية

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Abstract: In this paper, we study the endogenous formation of a joint lab in an oligopolistic market. We compare the situation where N firms choose their R&D efforts non-cooperatively and the situation where a subset of firms conduct their R&D through a partial joint lab. We show that the profits of the firms joining a lab increase with its size until a certain critical size. Beyond this critical size, the profits of the players decrease with the growth of the dimension of the lab. An important result yields that the socially optimum size of the lab is lower than the equilibrium size when the output spillover levels are sufficiently low such as applied research. The policy implications to this result suggest the intervention of public authorities to prohibit firms to form the grand joint lab or partial cooperations that can emerge spontaneously but are detrimental to social welfare through the strengthening of antitrust laws.

Keywords: Cournot oligopoly; R&D cooperation; Internal and external stability; Subgame perfect Nash equilibrium; Oligopole de Cournot (search for similar items in EconPapers)
Date: 2023
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Published in The Singapore Economic Review, In press, pp.1-35. ⟨10.1142/S0217590822500722⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04083457

DOI: 10.1142/S0217590822500722

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