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Cooperating in R&D and Advertising

Parisa Pourkarmi () and Gamal Atallah ()
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Parisa Pourkarmi: Department of Economics, Carleton University, Ottawa, ON

No 1902E, Working Papers from University of Ottawa, Department of Economics

Abstract: This paper studies the impact of cooperative R&D and advertising on innovation and welfare in a duopolistic industry. The model incorporates two symmetric firms producing differentiated products. Firms invest in R&D and advertising in the presence of R&D spillovers and advertising spillovers. Advertising spillovers may be positive or negative. Four cooperative structures are studied: no cooperation, R&D cooperation, advertising cooperation, R&D and advertising cooperation. R&D spillovers and advertising spillovers always increase innovation and welfare if products are highly differentiated and/or spillovers are sufficiently high. The ranking of cooperation settings in terms of R&D, profits and welfare depends on product differentiation, R&D spillovers and advertising externalities. Firms always prefer cooperation on both dimensions, which is socially beneficial only when advertising and R&D spillovers are sufficiently high.

Keywords: R&D; Advertising; Cooperation; Spillovers; Product differentiation; Innovation; Marketing. (search for similar items in EconPapers)
JEL-codes: D43 L13 O32 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2019
New Economics Papers: this item is included in nep-bec, nep-cdm, nep-com, nep-cse, nep-ind, nep-ino, nep-mic, nep-mkt and nep-sbm
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