Abstract
This paper considers a standard model of strategic R&D with spillovers in R&D inputs, and extends the result that duopoly firms engaged in a standard two-stage game of R&D and Cournot competition end up in a prisoner’s dilemma situation for their R&D decisions, whenever spillover effects and R&D costs are relatively low. In terms of social welfare, this prisoner’s dilemma always works to the advantage of both consumers and society. This result allows a novel and
enlightening perspective on some issues of substantial interest in the innovation literature. In particular, the incentive firms face towards R&D cooperation in the form of an R&D cartel is shown to be maximal for the case of zero spillovers, which is when the prisoner’s dilemma has the largest scope.
| Original language | English |
|---|---|
| Pages (from-to) | 254-261 |
| Number of pages | 8 |
| Journal | Mathematical Social Sciences |
| Volume | 66 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - Nov 2013 |
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