Product market competition and investments in cooperative R&D

J. Vandekerckhove, J. Hinloopen*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Building on the framework developed by Qiu (1997) we investigate the influence of product market competition on incentives to invest in cooperative R&D. For that we disentangle the three components that make up the combined-profits externality. The strategic component is always negative and the size component is always positive. The spillover component is negative (positive) with Bertrand (Cournot) competition. Cournot competition thus yields more cooperative R&D, which could drive the Cournot-Nash price below the Bertrand-Nash price. Our decomposition also explains why, under Cournot competition, cooperative R&D exceeds non-cooperative R&D only if spillovers are "high enough."
Original languageEnglish
JournalB E Journal of Economic Analysis & Policy
Volume11
Issue number1
DOIs
Publication statusPublished - 1 Jan 2011

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