Cooperative vs. Non-cooperative R&D under Uncertain Probability of Success

Rittwik Chatterjee and Tarun Kabiraj

MPRA Paper from University Library of Munich, Germany

Abstract: R&D decision of a firm involves various sources of incomplete information. The present paper introduces incomplete information about the success probability of R&D in a model of two firms interacting in R&D and production and discusses the choice between cooperative and non-cooperative research. We consider research joint venture as the form of R&D cooperation. While the choice depends on the constellation of parameters, the following results are derived, in general. First, the high type firm always has a larger incentive for both cooperative and non-cooperative R&D compared to the low type firm. Second, if the low type firm goes for non-cooperative research, then the high type firm must go for the same, and if the high type firm prefers cooperative research, the low type firm must also prefer cooperative R&D. However, if the high type firm prefers non-cooperative R&D, the low type firm may go for either form of research depending on the parameters. The paper derives conditions, in particular, for the case when the high type firm prefers non-cooperative research whereas the low type firm prefers cooperative research.

Keywords: Cooperative research; Non-cooperative research; Probability of success; Incomplete information; Research joint venture. (search for similar items in EconPapers)
JEL-codes: D43 D82 L13 O31 (search for similar items in EconPapers)
Date: 2023-06-14
New Economics Papers: this item is included in nep-bec, nep-com and nep-mic
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