On the prisoner's dilemma in Ramp;D with input spillovers and incentives for Ramp;D cooperation

C. Burr, M. Knauff, A. Stepanova

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9 Citations (Scopus)
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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 languageEnglish
Pages (from-to)254-261
Number of pages8
JournalMathematical Social Sciences
Volume66
Issue number3
Publication statusPublished - 2013

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