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Endogenous Formation Of A Joint Lab In An Oligopolistic Market: Private Incentives, Collective Incentives And Welfare

Author

Listed:
  • RAZIKA SAIT

    (Research Unit LaMOS, Faculty of Exact Sciences, University of Bejaia, 06000 Bejaia, Algeria)

  • ABDELHAKIM HAMMOUDI

    (��Université Paris-Saclay, INRAE, AgroParisTech, Paris-Saclay Applied Economics, 91120, Palaiseau, France)

  • MOHAMMED SAID RADJEF

    (Research Unit LaMOS, Faculty of Exact Sciences, University of Bejaia, 06000 Bejaia, Algeria)

Abstract

In this paper, we study the endogenous formation of a joint lab in an oligopolistic market. We compare the situation where N firms choose their R&D efforts non-cooperatively and the situation where a subset of firms conduct their R&D through a partial joint lab. We show that the profits of the firms joining a lab increase with its size until a certain critical size. Beyond this critical size, the profits of the players decrease with the growth of the dimension of the lab. An important result yields that the socially optimum size of the lab is lower than the equilibrium size when the output spillover levels are sufficiently low such as applied research. The policy implications to this result suggest the intervention of public authorities to prohibit firms to form the grand joint lab or partial cooperations that can emerge spontaneously but are detrimental to social welfare through the strengthening of antitrust laws.

Suggested Citation

  • Razika Sait & Abdelhakim Hammoudi & Mohammed Said Radjef, 2024. "Endogenous Formation Of A Joint Lab In An Oligopolistic Market: Private Incentives, Collective Incentives And Welfare," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 69(01), pages 425-459, March.
    • Handle: RePEc:wsi:serxxx:v:69:y:2024:i:01:n:s0217590822500722
    DOI: 10.1142/S0217590822500722
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    Keywords

    Cournot oligopoly; R&D cooperation; R&D spillovers; joint research lab; profitability; internal and external stability; social welfare; subgame perfect Nash equilibrium;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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