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Collaboration Networks in a Hotelling Game

Author

Listed:
  • Fabio Di Dio

    (European Commission, Joint Research Centre)

  • Luca Correani

    (Tuscia University in Viterbo)

Abstract

The paper investigates the stability and efficiency of R&D collaboration in a three-firm Hotelling game. Firms are assumed to be horizontally and vertically differentiated and to provide public services where price is thus set by the regulator. We show that firm-quality effort decreases with the number of links. Nonetheless, a conflict between stability and efficiency is likely to occur. We show that the complete network is uniquely stable but efficient only for a sufficiently low level of spillover rate. As a result, an over-connection problem may arise. However, for high spillover rates, the welfare-superior networks tend to be denser provided that the horizontal differentiation is low.

Suggested Citation

  • Fabio Di Dio & Luca Correani, 2019. "Collaboration Networks in a Hotelling Game," Economics Bulletin, AccessEcon, vol. 39(1), pages 127-141.
    • Handle: RePEc:ebl:ecbull:eb-18-00565
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2019/Volume39/EB-19-V39-I1-P14.pdf
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    References listed on IDEAS

    as
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    3. Hagedoorn, John, 2002. "Inter-firm R&D partnerships: an overview of major trends and patterns since 1960," Research Policy, Elsevier, vol. 31(4), pages 477-492, May.
    4. Keizo Mizuno & Yasunori Okumura, 2014. "Strategic Location Choice and Network Formation for Entry," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(2), pages 201-224, June.
    5. Yasunori Okumura, 2012. "Spatial competition and collaboration networks," International Journal of Game Theory, Springer;Game Theory Society, vol. 41(3), pages 455-472, August.
    6. Motta, Massimo, 1992. "Cooperative R&D and vertical product differentiation," International Journal of Industrial Organization, Elsevier, vol. 10(4), pages 643-661, December.
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Fabio Dio & Luca Correani, 2020. "Quality-improving and cost-reducing strategic alliances," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(2), pages 493-524, July.
    2. Luca Correani & Fabio Di Dio & Patrizio Morganti, 2022. "Does the Nature of Goods Affect Bilateral Exchange of Technology and Location Choice in Stable Networks?," Journal of Industry, Competition and Trade, Springer, vol. 22(3), pages 333-347, December.

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    More about this item

    Keywords

    Networks; Hotelling; Product Differentiation;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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