Endogenous heterogeneity in duopoly with deterministic one-way spillovers

Adriana Gama, Isabelle Maret and Virginie Masson

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: This paper examines the standard symmetric two-period R&D duopoly model, but with a deterministic one-way spillover structure. Though the two firms are ex-ante identical, one obtains a unique pair of asymmetric equilibria of R&D investments, leading to inter-firm heterogeneity in the industry, in R&D roles as well as in unit costs. We analyze the impact of a change in the spillover parameter and R&D costs on firms’ levels of R&D and profits. We find that higher spillovers need not lead to lower R&D investments for both firms. In addition, equilibrium profits may improve due to the presence of spillovers, and it may be advantageous to be the R&D imitator rather than the R&D innovator.

Keywords: One-way Spillovers; asymmetric R&D equilibria; R&D and interfirm heterogeneity; symmetry-breaking. (search for similar items in EconPapers)
JEL-codes: C72 D45 L10 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-com and nep-gth
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http://beta.u-strasbg.fr/WP/2018/2018-23.pdf (application/pdf)

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Journal Article: Endogenous heterogeneity in duopoly with deterministic one-way spillovers (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2018-23

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