Entry deterrence through cooperative R&D over-investment

Clémence Christin ()

No 38, DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: In this paper, we highlight new conditions under which R&D agreements may have anti-competitive effects. We focus on cases where two firms compete with each other and with a competitive fringe. R&D activities need a specific input available to all firms on a common market, the price of which increases with demand for the input. In such a context, if a firm increases its R&D expenses, it increases the cost of R&D for its rivals. This induces exit from the fringe and may increase the final price. Therefore, by contrast to the case where the cost of R&D for one firm is independent of its rivals' R&D decisions, cooperation between strategic firms on the upstream market may induce more R&D by strategic firms, in order to exclude firms from the fringe and increase the final price.

Keywords: Competition policy; Research and Development Agreements; Collusion; Entry deterrence (search for similar items in EconPapers)
JEL-codes: L13 L24 L41 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind, nep-ino, nep-ipr, nep-pr~, nep-sbm and nep-tid
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Entry Deterrence Through Cooperative R&D Over-Investment (2013)
Working Paper: Entry Deterrence Through Cooperative R&D Over-Investment (2013)
Working Paper: Entry deterrence through cooperative R&D over-investment (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:38

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