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Sequencing R&D decisions in a two-period duopoly with spillovers

Author

Listed:
  • Jim Jin

    (Department of Economics, The Queen's University of Belfast, Belfast, BT7 1NN, Northern Ireland, UK)

  • Rabah Amir

    (Department of Economics, University of Southern Denmark, 5230 Odense M, DENMARK)

  • Madjid Amir

    (Department of Statistics and Operations Research, King Saud University, P.O.Box 2455, Riyadh 11451, SAUDI ARABIA)

Abstract

We compare simultaneous versus sequential moves in R&D decisions within an asymmetric R&D/Cournot model with linear demand (for differentiated products), general R&D costs, and spillovers. Simultaneous play and sequential play (with and without a specified leader) can emerge as appropriate formulations, depending on the ratios of spillover rate over demand cross-slope, but not on R&D efficiency. When at least one ratio is above 1/2, a sequential solution mitigates competition and leads to higher profits for each firm, and to higher social welfare. When uniquely specified, the stronger firm emerges as the R&D first-mover.

Suggested Citation

  • Jim Jin & Rabah Amir & Madjid Amir, 2000. "Sequencing R&D decisions in a two-period duopoly with spillovers," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(2), pages 297-317.
    • Handle: RePEc:spr:joecth:v:15:y:2000:i:2:p:297-317
    Note: Received: December 8, 1997; revised version: October 25, 1998
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    Cited by:

    1. Jiaqi Chen & Sang-ho Lee, 2022. "R&D rivalry with the interaction of output subsidies in an extensive endogenous timing game," Economics Bulletin, AccessEcon, vol. 42(3), pages 1621-1630.
    2. Achim Hecker & Tobias Kretschmer, 2014. "Public R&D as a Standard-Setting Device," Industry and Innovation, Taylor & Francis Journals, vol. 21(7-8), pages 599-615, November.
    3. Chu, Tong & Zhou, Wei, 2022. "Complex dynamics of R&D competition with one-way spillover based on intellectual property protection," Chaos, Solitons & Fractals, Elsevier, vol. 163(C).
    4. TESORIERE, Antonio, 2005. "Endogenous R&D symmetry in linear duopoly with one-way spillovers," LIDAM Discussion Papers CORE 2005045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    5. Tobias Kretschmer & Katrin Muehlfeld, 2006. "Co-Opetition and Prelaunch in Standard-Setting for Developing Technologies," CEP Discussion Papers dp0742, Centre for Economic Performance, LSE.
    6. Smrkolj, Grega & Wagener, Florian, 2019. "Research among copycats: R&D, spillovers, and feedback strategies," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 82-120.
    7. Marco Marini & Giorgio Rodano, 2012. "Sequential vs Collusive Payoffs in Symmetric Duopoly Games," DIAG Technical Reports 2012-06, Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza".
    8. Amir, Rabah, 2000. "Modelling imperfectly appropriable R&D via spillovers," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1013-1032, October.
    9. Kerstan, Sven & Kretschmer, Tobias & Muehlfeld, Katrin, 2012. "The dynamics of pre-market standardization," Information Economics and Policy, Elsevier, vol. 24(2), pages 105-119.
    10. Marco Marini & Giorgio Rodano, 2011. "Lead, Follow or Cooperate? Endogenous Timing & Cooperation in Symmetric Duopoly Games," Working Papers 1112, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2011.
    11. Chalioti, Evangelia & Serfes, Konstantinos, 2017. "Strategic incentives for innovations and market competition," International Journal of Industrial Organization, Elsevier, vol. 52(C), pages 427-449.
    12. Alain-Désiré Nimubona & Hassan Benchekroun, 2014. "Environmental R&D in the Presence of an Eco-Industry," Working Papers 1406, University of Waterloo, Department of Economics, revised Sep 2014.
    13. Lee, Sang-Ho & Muminov, Timur, 2020. "R&D Spillovers and Welfare Effect of Privatization with an R&D Subsidy," MPRA Paper 99937, University Library of Munich, Germany.
    14. Marco A. Marini & Maria L. Petit & Roberta Sestini, 2014. "Strategic timing in R&D agreements," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 23(3), pages 274-303, April.
    15. Evangelia Chalioti, 2015. "Incentive contracts under product market competition and R&D spillovers," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 58(2), pages 305-328, February.
    16. Magnus Hoffmann & Grégoire Rota‐Graziosi, 2020. "Endogenous timing in the presence of non‐monotonicities," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(1), pages 359-402, February.
    17. Tesoriere, Antonio, 2008. "Endogenous R&D symmetry in linear duopoly with one-way spillovers," Journal of Economic Behavior & Organization, Elsevier, vol. 66(2), pages 213-225, May.
    18. Maria Luisa Petit & Francesca Sanna-Randaccio & Roberta Sestini, 2012. "R&D and foreign direct investment with asymmetric spillovers," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 21(2), pages 125-150, October.
    19. Chiara CONTI, 2013. "Asymmetric information in a duopoly with spillovers: new findings on the effects of RJVs," Departmental Working Papers 2013-04, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    20. Sang-Ho Lee & Timur K. Muminov, 2021. "Endogenous Timing of R&D Decisions and Privatization Policy with Research Spillovers," Journal of Industry, Competition and Trade, Springer, vol. 21(4), pages 505-525, December.
    21. Jan Vandekerckhove & Raymond De Bondt, 2008. "Asymmetric Spillovers And Investments In Research And Development Of Leaders And Followers," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 17(5), pages 417-433.
    22. Cong Pan, 2018. "Firms’ timing of production with heterogeneous consumers," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(4), pages 1339-1362, November.
    23. Ishikawa, Nana & Shibata, Takashi, 2021. "R&D competition and cooperation with asymmetric spillovers in an oligopoly market," International Review of Economics & Finance, Elsevier, vol. 72(C), pages 624-642.
    24. Kaiser, Ulrich, 2002. "An empirical test of models explaining research expenditures and research cooperation: evidence for the German service sector," International Journal of Industrial Organization, Elsevier, vol. 20(6), pages 747-774, June.

    More about this item

    Keywords

    R&D spillovers; Cournot duopoly; Subgame-perfect Equilibrium; Endogenous timing.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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