R&D as a Prisoner's Dilemma and R&D-Avoiding Cartels

19 Pages Posted: 30 Dec 2010

See all articles by Rabah Amir

Rabah Amir

University of Arizona - Department of Economics; University of Arizona

Filomena Garcia

Indiana University; ISEG - Technical University of Lisbon; UECE - Research Unit in Economics and Complexity

Christine Halmenschlager

University of Paris II Pantheon-Assas - ERMES

Joana Pais

Universidade de Lisboa, School of Economics and Management and UECE -- Research Unit on Complexity in Economics

Date Written: December 16, 2010

Abstract

Duopoly firms engaged in a standard two-stage game of R&D and Cournot competition are caught in a prisoner's dilemma for their R&D decisions whenever spillover effects are low. This effect works to the advantage of consumers and society. This result provides an interesting perspective on the well-known wedge between private and social incentives for R&D. The prisoner's dilemma is the key effect behind this wedge under low spillovers. The latter take over when sufficiently high, as is widely recognized. This mutually exclusive nature of the prisoner's dilemma and significant spillovers also serves to explain the incentives to form R&D cartels.

Suggested Citation

Amir, Rabah and Garcia, Filomena and Halmenschlager, Christine and Pais, Joana, R&D as a Prisoner's Dilemma and R&D-Avoiding Cartels (December 16, 2010). The Manchester School, Vol. 79, Issue 1, pp. 81-99, 2010. Available at SSRN: https://ssrn.com/abstract=1732465 or http://dx.doi.org/10.1111/j.1467-9957.2010.02233.x

Rabah Amir (Contact Author)

University of Arizona - Department of Economics ( email )

Tucson, AZ 85721
United States

University of Arizona ( email )

Department of History
Tucson, AZ 85721
United States

Filomena Garcia

Indiana University ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States

ISEG - Technical University of Lisbon ( email )

R. Miguel Lupi, 20
Lisbon, 1200
Portugal

UECE - Research Unit in Economics and Complexity ( email )

Rua Miguel Lupi, 20
Lisboa, 1200-781
Portugal

Christine Halmenschlager

University of Paris II Pantheon-Assas - ERMES ( email )

12 Place du Panthéon
Paris, Cedex 5, 75005
France

Joana Pais

Universidade de Lisboa, School of Economics and Management and UECE -- Research Unit on Complexity in Economics ( email )

Rua do Quelhas 6
Lisboa, 1200-781
Portugal

Register to save articles to
your library

Register

Paper statistics

Downloads
2
Abstract Views
283
PlumX Metrics