Disclosing versus Withholding Technology Knowledge in a Duopoly
University of Bologna - Department of Economics
Paolo G. Garella
University of Milan - Dipartimento di Scienze Economiche, Aziendali e Statistiche
Manchester School, Vol. 76, Issue 1, pp. 88-103, January 2008
We study firms incentives to transfer knowledge about production technology to a rival in a Cournot duopoly. In a setting where two technologies are available, a technology is characterized by its associated cost function and no single technology is strictly superior to the other. A firm has superior information if it knows both techniques and the other only one. Cost efficiency may be reversed after the voluntary disclosure, so that the rival's costs are improved at the equilibrium level of output. Adding R&D investments to the picture, we find that a firm can decide to invest just for the purpose of acquiring knowledge that will be transferred and not used. Furthermore, for the same point in the parameter space, the acquisition of full knowledge may occur or not as a function of the initial distribution of information.
Number of Pages in PDF File: 16Accepted Paper Series
Date posted: December 23, 2007
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