Title
R&D competition versus R&D cooperation in oligopolistic markets with evolving structureR&D competition versus R&D cooperation in oligopolistic markets with evolving structure
Author
Faculty/Department
Faculty of Applied Economics
Research group
Economics
Publication type
article
Publication
Amsterdam,
Subject
Economics
Source (journal)
International journal of industrial organization. - Amsterdam
Volume/pages
31(2013):5, p. 527-537
ISSN
0167-7187
ISI
000330000800015
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
This paper considers investment behavior of duopolistic firms subject to technological progress. It is assumed that initially both firms offer a homogeneous product, but after a stochastic waiting time they are able to implement a product innovation. Production capacities of both firms are product specific. It is shown that firms anticipate a future product innovation by under-investing (if the new product is a substitute to the established product) and higher profits, and over-investing (in case of complements) and lower profits, compared to the corresponding standard capital accumulation game. This anticipation effect is stronger in the case of R&D cooperation. Furthermore, since due to R&D cooperation firms introduce the new product at the same time, this leads to intensified competition and lower firm profits right after the new product has been introduced. In addition, we show that under R&D competition the firm that innovates first, overshoots in new-product capacity buildup in order to exploit its temporary monopoly position. Taking into account all these effects, the result is that, if the new product is neither a close substitute nor a strong complement of the established product, positive synergy effects in R&D cooperation are necessary to make it more profitable for firms than R&D competition. (C) 2013 Elsevier B.V. All rights reserved.
E-info
https://repository.uantwerpen.be/docman/iruaauth/fcdd70/7a07026.pdf
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