Collusion and Research Joint Ventures

42 Pages Posted: 17 Dec 2007  

Kaz Miyagiwa

Emory University - Department of Economics; Osaka University - Institute of Social and Economic Research (ISER); Florida International University (FIU) - Department of Economics

Date Written: December 1, 2007

Abstract

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.

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

JEL Classification: L12, L13

Suggested Citation

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

Kaz Miyagiwa (Contact Author)

Emory University - Department of Economics ( email )

1602 Fishburne Drive
Atlanta, GA 30322
United States

Osaka University - Institute of Social and Economic Research (ISER) ( email )

6-1 Mihogaoka
Ibaraki Osaka 567-0047
Japan

Florida International University (FIU) - Department of Economics ( email )

Miami, FL 33199
United States

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