R&D Network Formation with Myopic and Farsighted Firms

51 Pages Posted: 8 Dec 2018

See all articles by Ana Mauleon

Ana Mauleon

Université Saint-Louis - Bruxelles; Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

José J. Sempere-Monerris

University of Valencia - Department of Economic Analysis

Vincent Vannetelbosch

Catholic University of Louvain (UCL)

Date Written: July 8, 2018

Abstract

We study the formation of R&D networks when each firm benefits from the research done by other firms it is connected to. Firms can be either myopic or farsighted when deciding about the links they want to form. We propose the notion of myopic-farsighted stable set to determine the R&D networks that emerge in the long run. When the majority of firms is myopic, stability leads to R&D networks consisting of either two asymmetric components with the largest component comprises three-quarters of firms or two symmetric components of nearly equal size with the largest component having only myopic firms. But, once the majority of firms becomes farsighted, only R&D networks with two asymmetric components remain stable. Firms in the largest component obtain greater profits, with farsighted firms having in average more collaborations than myopic firms that are either loose-ends or central for spreading the innovation within the component. Besides myopic and farsighted firms, we introduce yes-firms that always accept the formation of any link and never delete a link subject to the constraint of non-negative profits. We show that yes-firms can stabilize R&D networks consisting of a single component that maximize the social welfare. Finally, we look at the evolution of R&D networks and we find that R&D networks with two symmetric components will be rapidly dismantled, single component R&D networks will persist many periods, while R&D networks consisting of two asymmetric components will persist forever.

Keywords: Networks; R&D collaborations; Oligopoly; Myopia; Farsightedness

JEL Classification: C70, L13, L20

Suggested Citation

Mauleon Echeverria, Ana Carmen and Sempere-Monerris, Jose J. and Vannetelbosch, Vincent, R&D Network Formation with Myopic and Farsighted Firms (July 8, 2018). Available at SSRN: https://ssrn.com/abstract=3298102 or http://dx.doi.org/10.2139/ssrn.3298102

Ana Carmen Mauleon Echeverria

Université Saint-Louis - Bruxelles ( email )

Brussels, 1000
Belgium

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

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

Jose J. Sempere-Monerris

University of Valencia - Department of Economic Analysis ( email )

Campus de los Naranjos
46022 Valencia
Spain

Vincent Vannetelbosch (Contact Author)

Catholic University of Louvain (UCL) ( email )

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

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