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Collusion and Research Joint Ventures

Kaz Miyagiwa

affiliation not provided to SSRN

December 1, 2007

ISER Discussion Paper No. 704

We examine whether cooperation in R&D leads to product market collusion. Suppose that firms engage in a stochastic R&D race while maintaining the collusive equilibrium in a repeated-game framework. Innovation under competitive R&D creates inter-firm asymmetries, which destabilizes the collusive equilibrium. Innovation sharing through cooperative R&D preserves symmetries, thereby facilitating collusion. Sharing an efficient technology also increases industry profit, which contributes to the collusion stability but also raises social welfare. Interestingly, a welfare improvement is less likely if innovation leads to a large cost reduction. The effect of licensing under competition R&D is also examined.

Number of Pages in PDF File: 42

Keywords: Collusion, Research Joint Ventures, Innovation, R&D

JEL Classification: L12, L13

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Date posted: December 17, 2007  

Suggested Citation

Miyagiwa, Kaz, Collusion and Research Joint Ventures (December 1, 2007). ISER Discussion Paper No. 704. Available at SSRN: http://ssrn.com/abstract=1072464 or http://dx.doi.org/10.2139/ssrn.1072464

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Kaz Miyagiwa (Contact Author)
affiliation not provided to SSRN
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