Downstream Research Joint Venture with Upstream Market Power

Constantine Manasakis () and Emmanuel Petrakis

No 513, Working Papers from University of Crete, Department of Economics

Abstract: In this paper, we examine how the structure of an imperfectly competitive input market affects final-good producers’ incentives to form a Research Joint Venture (RJV), in a differentiated duopoly where R&D investments exhibit spillovers. Although a RJV is always profitable, downstream firms’ incentives for R&D cooperation are non-monotone in the structure of the input market, with incentives being stronger under a monopolistic input supplier, whenever spillovers are low. In contrast to the hold-up argument, we also find that under non-cooperative R&D investments and weak free-riding, final-good producers invest more when facing a monopolistic input supplier, compared with investments under competing vertical chains. Integrated innovation and competition policies are also discussed.

Keywords: Oligopoly; Process Innovations, Research Joint Ventures (search for similar items in EconPapers)
JEL-codes: L13 O31 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2005-09
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-mic
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Journal Article: Downstream Research Joint Venture with Upstream Market Power (2014)
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