Collaborative Networks in Oligopoly with Asymmetric Firms

This paper studies collaborative R&D networks among ex ante asymmetric firms. In the first stage firms form bilateral collaborative links, which reduce firms’ marginal costs. In the second stage firms engage in Cournot competition. We characterize the structure of stable networks and study how firms’ initial sizes (costs) affect their network positions. One of the main results is that in stable networks firms’ initial sizes and their number of links are positively but not perfectly correlated. We also characterize efficient networks, which always amplify the initial asymmetry among firms.