In an extended version of d’Aspremont and Jacquemin’s (1988) R&D competition model, we identify a region where the game is a prisoner’s dilemma in that region firms’ optimal strategy still prescribes to invest in R&D. However, they would obtain a higher profit by not investing at all. A standard Folk Theorem argument suggests that firms implicitly tend to collude and refrain from investing in R&D when their interaction is repeated. When this happens, social welfare shrinks, but we argue that promoting joint research constitutes a remedy to the lack of innovation efforts, rather than the excess thereof.
E. Bacchiega, L. Lambertini, A. Mantovani (2010). R&D-Hindering Collusion. THE B.E. JOURNAL OF ECONOMIC ANALYSIS & POLICY, 10, 1-13.
R&D-Hindering Collusion
BACCHIEGA, EMANUELE;LAMBERTINI, LUCA;MANTOVANI, ANDREA
2010
Abstract
In an extended version of d’Aspremont and Jacquemin’s (1988) R&D competition model, we identify a region where the game is a prisoner’s dilemma in that region firms’ optimal strategy still prescribes to invest in R&D. However, they would obtain a higher profit by not investing at all. A standard Folk Theorem argument suggests that firms implicitly tend to collude and refrain from investing in R&D when their interaction is repeated. When this happens, social welfare shrinks, but we argue that promoting joint research constitutes a remedy to the lack of innovation efforts, rather than the excess thereof.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
