R&D-Hindering Collusion

18 Pages Posted: 21 Nov 2008

See all articles by Emanuele Bacchiega

Emanuele Bacchiega

University of Bologna - Department of Economics

Luca Lambertini

University of Bologna - Department of Economics

Andrea Mantovani

Catholic University of Louvain

Date Written: November 19, 2008

Abstract

In an extended version of d'Aspremont and Jacquemin's (1988) R&D competition model we find a region where the game is a prisoner's dilemma: firms still invest in R&D but they would obtain a higher profit by not investing at all. In a repeated version of the game, we prove that firms implicitly tend to collude and refrain from investing in R&D, thus decreasing social welfare. When this happens, inviting firms to form a joint venture appears as a remedy to the lack of innovation efforts rather than the excess thereof.

Keywords: collusion, process innovation, social welfare

JEL Classification: D43, L13, O31

Suggested Citation

Bacchiega, Emanuele and Lambertini, Luca and Mantovani, Andrea, R&D-Hindering Collusion (November 19, 2008). Available at SSRN: https://ssrn.com/abstract=1304103 or http://dx.doi.org/10.2139/ssrn.1304103

Emanuele Bacchiega (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
40126 Bologna, 40125
Italy
+390512098486 (Phone)
+390512098493 (Fax)

Luca Lambertini

University of Bologna - Department of Economics ( email )

Strada Maggiore 45
Bologna, 40125
Italy
+39 051 2092600 (Phone)
+39 051 2092664 (Fax)

Andrea Mantovani

Catholic University of Louvain ( email )

34 Voie du Roman Pays
B-1348 Louvain-la-Neuve, b-1348
Belgium

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