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Cooperative vs. non-cooperative R&D under uncertain probability of success

Author

Listed:
  • Rittwik Chatterjee

    (Hiralal Mazumdar Memorial College for Women)

  • Tarun Kabiraj

    (Indian Statistical Institute)

Abstract

The present paper introduces incomplete information about success probability of R&D in a model of two firms interacting in R&D and production and discusses the choice between research joint venture (RJV) and non-cooperative R&D. We have shown that whenever the high-type firm prefers RJV, the low-type firm also prefers RJV, and if the low-type firm prefers non-cooperative R&D, the other firm will do the same. On the other hand, when the high-type firm prefers non-cooperative research, the low-type firm will go for RJV or non-cooperative research depending on the constellation of parameters. However, the high-type firm preferring RJV and the low-type firm preferring non-cooperative research can never occur under incomplete information, although this can be a possibility under complete information. Finally, if the R&D cost is at the intermediate level and the probability that a firm is of high type is above a critical level, RJV will occur irrespective of the type distribution of nature. RJV may also occur when both firms are low type and the corresponding probability belongs to an interval. In all other cases non-cooperative R&D will occur.

Suggested Citation

  • Rittwik Chatterjee & Tarun Kabiraj, 2024. "Cooperative vs. non-cooperative R&D under uncertain probability of success," Indian Economic Review, Springer, vol. 59(1), pages 87-103, June.
    • Handle: RePEc:spr:inecre:v:59:y:2024:i:1:d:10.1007_s41775-024-00228-w
    DOI: 10.1007/s41775-024-00228-w
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    More about this item

    Keywords

    Cooperative research; Non-cooperative research; Probability of success; Incomplete information; Research joint venture;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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