A Duopoly Experiment on Cooperative and Noncooperative R&D
University of Antwerp - Faculty of Applied Economics; Tilburg University
CentER Discussion Paper No. 2003-77
In this paper, an experimental environment to test theoretical predictions concerning R&D behavior of firms in duopoly with allowance for R&D spillovers is created. The design and hypotheses of the experiment are based on the well-known model of d Aspremont and Jacquemin in which R&D behavior of firms either competing or cooperating in R&D, is calculated. No difference in behavior between different spillover levels is found. Further, I find that irrespective of the technological spillover level, subjects do not always commit to an R&D contract, but if they commit to an R&D level in a binding contract, cooperative R&D levels are chosen. When subjects do not or cannot commit to a contract, the subgame perfect Nash equilibrium performs well in predicting R&D decisions.
Number of Pages in PDF File: 23
Keywords: R&D, duopoly, experiment
JEL Classification: C90, L13, O31working papers series
Date posted: July 25, 2004
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