Endogenous firm asymmetry and cooperative R&D in linear duopoly with spillovers

Antonio Tesoriere

No 2005086, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: In a linear model ofcost reducing R&D/Cournot competition, firm asymmetry is shown to be sustainable as subgame perfect Nash equilibrium with R&D competition only ifthe productivity of research is sufficiently large relative to the benefits from imitation. In such a case, industry-wide cost reduction and firms asymmetry are increasing and decreasing functions of the spillover rate, respectively. In the absence of spillovers, a symmetric joint lab generates higher consumer surplus and social welfare than a pair ofasymmetric competitors. If spillovers are not too small, asymmetric R&D competition is advantageous toconsumers, but not to firms.

Keywords: endogenous asymmetry; Cournot instability; R&D cooperation (search for similar items in EconPapers)
JEL-codes: C72 L13 O32 (search for similar items in EconPapers)
Date: 2005-12
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