Startseite The R&D Investment Decision Game with Product Differentiation
Artikel
Lizenziert
Nicht lizenziert Erfordert eine Authentifizierung

The R&D Investment Decision Game with Product Differentiation

  • Domenico Buccella ORCID logo , Luciano Fanti und Luca Gori ORCID logo EMAIL logo
Veröffentlicht/Copyright: 12. September 2022
The B.E. Journal of Theoretical Economics
Aus der Zeitschrift The B.E. Journal of Theoretical Economics Band 23 Heft 2

Abstract

This article extends the cost-reducing R&D model with spillovers by d’Aspremont and Jacquemin (1988. “Cooperative and Noncooperative R&D in Duopoly with Spillovers.” The American Economic Review 78: 1133–7, 1990. “Cooperative and Noncooperative R&D in Duopoly with Spillovers: Erratum.” The American Economic Review 80: 641–2) to allow quantity-setting firms (Cournot rivalry) to play the non-cooperative R&D investment decision game with horizontal product differentiation. Unlike Bacchiega, Lambertini, and Mantovani (2010. “R&D-hindering Collusion.” The B.E. Journal of Economic Analysis & Policy 10 (Topics): 66), who identify a parametric region (defined by the extent of technological spillovers and the efficiency of R&D activity), in which the game is a prisoner’s dilemma (self-interest and mutual benefit of cost-reducing innovation conflict), this work shows that product differentiation changes the game into a deadlock (self-interest and mutual benefit do not conflict), regardless of the parameter scale (i.e. also in the absence of spill-over effects). Then investing in R&D challenges the improvement of interventions aimed at favouring product differentiation. This is because social welfare when firms invest in cost-reducing R&D is greater than when firms do not invest in R&D. Alternatively, R&D subsidies can be used as a social welfare maximising tool also in the absence of R&D spillovers. These results also hold for price-setting firms (Bertrand rivalry).

Keywords: process innovation; Nash equilibrium; social welfare
JEL Classification: D43; L13; O31
Corresponding author: Luca Gori, Department of Law, University of Pisa, Via Collegio Ricci, 10, I–56126 Pisa (PI), Italy, E-mail:

Funding source: Institutions, imperfect markets, and policy problems, Università di Pisa.

Award Identifier / Grant number: PRA_2018_12

Funding source: Infectious diseases, health, and development: economic and legal effects, Università di Pisa.

Award Identifier / Grant number: PRA_2020_64

Acknowledgements

The authors acknowledge two anonymous reviewers for their valuable comments allowing to improve the quality of the article. The usual disclaimer applies.

  1. Research funding: The authors declare that this study was funded by the University of Pisa. Luciano Fanti acknowledges financial support from the University of Pisa under the “PRA – Progetti di Ricerca di Ateneo” (Institutional Research Grants) – Project No. PRA_2018_12 “Institutions, imperfect markets, and policy problems”. Luca Gori acknowledges financial support from the University of Pisa under the “PRA – Progetti di Ricerca di Ateneo” (Institutional Research Grants), Project No. PRA_2020_64 “Infectious diseases, health, and development: economic and legal effects”.

  2. Conflict of interest statement: The authors declare that they have no conflict of interest.

  3. Author contribution: All the authors have accepted responsibility for the entire content of this submitted manuscript and approved submission.

References

Amir, R. 2000. “Modelling Imperfectly Appropriable R&D via Spillovers.” International Journal of Industrial Organization 18: 1013–32. https://doi.org/10.1016/s0167-7187(00)00071-0.Suche in Google Scholar

Amir, R., I. Evstigneev, and J. Wooders. 2003. “Noncooperative versus Cooperative R&D with Endogenous Spillover Rate.” Games and Economic Behavior 42: 183–207. https://doi.org/10.1016/s0899-8256(02)00541-9.Suche in Google Scholar

Amir, R., H. Liu, D. Machowska, and J. Resende. 2019. “Spillovers, Subsidies, and Second‐best Socially Optimal R&D.” Journal of Public Economic Theory 21: 1200–20. https://doi.org/10.1111/jpet.12411.Suche in Google Scholar

Atallah, G. 2004. “The Protection of Innovations.” In CIRANO Working Paper 2004s-02. Also available at: https://cirano.qc.ca/files/publications/2004s-02.pdf.Suche in Google Scholar

Bacchiega, E., L. Lambertini, and A. Mantovani. 2010. “R&D-Hindering Collusion.” The B.E. Journal of Economic Analysis & Policy 10 (Topics): 66. https://doi.org/10.2202/1935-1682.2157.Suche in Google Scholar

Buccella, D., L. Fanti, and L. Gori. 2021. “A Contribution to the Theory of R&D Investments.” In GLO Discussion Paper No. 940.Suche in Google Scholar

Burr, C., M. Knauff, and A. Stepanova. 2013. “On the Prisoner’s Dilemma in R&D with Input Spillovers and Incentives for R&D Cooperation.” Mathematical Social Sciences 66: 254–61. https://doi.org/10.1016/j.mathsocsci.2013.05.004.Suche in Google Scholar

d’Aspremont, C., and A. Jacquemin. 1988. “Cooperative and Noncooperative R&D in Duopoly with Spillovers.” The American Economic Review 78: 1133–7.Suche in Google Scholar

d’Aspremont, C., and A. Jacquemin. 1990. “Cooperative and Noncooperative R&D in Duopoly with Spillovers: Erratum.” The American Economic Review 80: 641–2.Suche in Google Scholar

De Bondt, R. 1996. “Spillovers and Innovative Activities.” International Journal of Industrial Organization 15: 1–28. https://doi.org/10.1016/s0167-7187(96)01023-5.Suche in Google Scholar

Dixit, A. K. 1979. “A Model of Duopoly Suggesting a Theory of Entry Barriers.” The Bell Journal of Economics 10: 20–32. https://doi.org/10.2307/3003317.Suche in Google Scholar

Gersbach, H., and A. Schmutzler. 2003. “Endogenous Spillovers and Incentives to Innovate.” Economic Theory 21: 59–79. https://doi.org/10.1007/s00199-001-0245-8.Suche in Google Scholar

Gil-Moltó, M. J., N. Georgantzis, and V. Orts. 2005. “Cooperative R&D with Endogenous Technology Differentiation.” Journal of Economics and Management Strategy 14: 461–76. https://doi.org/10.1111/j.1530-9134.2005.00048.x.Suche in Google Scholar

Henriques, I. 1990. “Cooperative and Noncooperative R&D in Duopoly with Spillovers: Comment.” The American Economic Review 80: 638–40.Suche in Google Scholar

Heywood, J. S., Z. Wang, and G. Ye. 2022. “R&D Rivalry with Endogenous Compatibility.” The Manchester School 90: 354–384.10.1111/manc.12399Suche in Google Scholar

Hinloopen, J. 1997. “Subsidizing Cooperative and Noncooperative R&D in Duopoly with Spillovers.” Journal of Economics 66: 151–75. https://doi.org/10.1007/bf01234404.Suche in Google Scholar

Hinloopen, J. 2000. “More on Subsidizing Cooperative and Noncooperative R&D in Duopoly with Spillovers.” Journal of Economics 3: 295–308. https://doi.org/10.1007/bf01231269.Suche in Google Scholar

Hinloopen, J. 2015. “Stability, Strategic Substitutes, Strategic Complements.” Journal of Economics 116: 129–35. https://doi.org/10.1007/s00712-014-0422-4.Suche in Google Scholar

Kamien, M. I., E. Muller, and I. Zang. 1992. “Research Joint Ventures and R&D Cartels.” The American Economic Review 82: 1293–306.Suche in Google Scholar

Lambertini, L., F. Lotti, and F. Santarelli. 2004. “Infra-industry Spillovers and R&D Cooperation: Theory and Evidence.” Economics of Innovation and New Technology 13: 311–28. https://doi.org/10.1080/10438590410001629016.Suche in Google Scholar

Lambertini, L., and G. Rossini. 2009. “The Gains from Cooperative R&D with a Concave Technology and Spillovers.” International Game Theory Review 11: 1–9. https://doi.org/10.1142/s0219198909002157.Suche in Google Scholar

Lee, S.-H., and T. K. Muminov. 2021. “R&D Information Sharing in a Mixed Duopoly and Incentive Subsidy for Research Joint Venture Competition.” Bulletin of Economic Research 73: 154–70. https://doi.org/10.1111/boer.12239.Suche in Google Scholar

Milliou, C. 2009. “Endogenous Protection of R&D Investments.” Canadian Journal of Economics 42: 184–205. https://doi.org/10.1111/j.1540-5982.2008.01504.x.Suche in Google Scholar

Naskar, M., and R. Pal. 2020. “Network Externalities and Process R&D: A Cournot-Bertrand Comparison.” Mathematical Social Sciences 103: 51–8. https://doi.org/10.1016/j.mathsocsci.2019.11.006.Suche in Google Scholar

Piga, C., and J. Poyago-Theotoky. 2005. “Endogenous R&D Spillovers and Location Choice.” Regional Science and Urban Economics 35: 127–39. https://doi.org/10.1016/j.regsciurbeco.2004.02.002.Suche in Google Scholar

Poyago-Theotoky, J. 1999. “A Note on Endogenous Spillovers in a Non-tournament R&D Duopoly.” Review of Industrial Organization 15: 253–62. https://doi.org/10.1023/a:1007732218120.10.1023/A:1007732218120Suche in Google Scholar

Seade, J. 1980. “The Stability of Cournot Revisited.” Journal of Economic Theory 23: 15–27. https://doi.org/10.1016/0022-0531(80)90028-9.Suche in Google Scholar

Shrivastav, S. 2021. “Network Compatibility, Intensity of Competition and Process R&D: A Generalization.” Mathematical Social Sciences 109: 152–63. https://doi.org/10.1016/j.mathsocsci.2020.12.003.Suche in Google Scholar

Singh, N., and X. Vives. 1984. “Price and Quantity Competition in a Differentiated Duopoly.” The RAND Journal of Economics 15: 546–54. https://doi.org/10.2307/2555525.Suche in Google Scholar

Suzumura, K. 1992. “Cooperative and Noncooperative R&D in an Oligopoly with Spillovers.” The American Economic Review 82: 1307–20.Suche in Google Scholar

Ziss, S. 1994. “Strategic R&D with Spillovers, Collusion and Welfare.” The Journal of Industrial Economics 42: 375–93. https://doi.org/10.2307/2950444.Suche in Google Scholar

Supplementary Material

The online version of this article offers supplementary material (https://doi.org/10.1515/bejte-2021-0129).

Received: 2021-10-11
Revised: 2022-06-08
Accepted: 2022-06-19
Published Online: 2022-09-12

© 2022 Walter de Gruyter GmbH, Berlin/Boston

Artikel in diesem Heft

  1. Frontmatter
  2. Research Articles
  3. Collusion, Shading, and Optimal Organization Design
  4. Software Cracking and Degrees of Software Protection
  5. The R&D Investment Decision Game with Product Differentiation
  6. An Urban Configuration with Online Competition
  7. Double Implementation in Dominant Strategy Equilibria and Ex-Post Equilibria with Private Values
  8. Risk Aversion and Uniqueness of Equilibrium in Economies with Two Goods and Arbitrary Endowments
  9. On Iterated Nash Bargaining Solutions
  10. Inter-league Competition and the Optimal Broadcasting Revenue-Sharing Rule
  11. The Weak Hybrid Equilibria of an Exchange Economy with a Continuum of Agents and Externalities
  12. Choosing Sides in a Two-Sided Matching Market
  13. Notes
  14. On the Relation between Private Information and Non-Fundamental Volatility
  15. Cost-Reducing Technologies and Labor Supply in a Krugman-type Model where Consumption is Time-Constrained: Some New Results
https://doi.org/10.1515/bejte-2021-0129
Schlagwörter für diesen Artikel
process innovation; Nash equilibrium; social welfare

Artikel in diesem Heft

  1. Frontmatter
  2. Research Articles
  3. Collusion, Shading, and Optimal Organization Design
  4. Software Cracking and Degrees of Software Protection
  5. The R&D Investment Decision Game with Product Differentiation
  6. An Urban Configuration with Online Competition
  7. Double Implementation in Dominant Strategy Equilibria and Ex-Post Equilibria with Private Values
  8. Risk Aversion and Uniqueness of Equilibrium in Economies with Two Goods and Arbitrary Endowments
  9. On Iterated Nash Bargaining Solutions
  10. Inter-league Competition and the Optimal Broadcasting Revenue-Sharing Rule
  11. The Weak Hybrid Equilibria of an Exchange Economy with a Continuum of Agents and Externalities
  12. Choosing Sides in a Two-Sided Matching Market
  13. Notes
  14. On the Relation between Private Information and Non-Fundamental Volatility
  15. Cost-Reducing Technologies and Labor Supply in a Krugman-type Model where Consumption is Time-Constrained: Some New Results
Jetzt anmelden und 20% sparen
Institutioneller Zugang
Wie funktioniert Authentifizierung?
Haben Sie eine Idee, wie wir unsere Website verbessern können?
Bitte schreiben Sie uns.
© 2025 De Gruyter Brill
Heruntergeladen am 18.11.2025 von https://www.degruyterbrill.com/document/doi/10.1515/bejte-2021-0129/html
Button zum nach oben scrollen