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R&D Alliances as Non-cooperative Supergames

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  • Cabral, Luís M B

Abstract

R&D alliances (Research Joint Ventures or other institutional forms) normally involve repeated, non-contractible actions (investments in R&D), and uncertainty regarding both success and the termination date. Accordingly, we model these agreements as equilibria of infinite-period supergames. Our approach is normative, namely that of finding optimal equilibria from the perspective of the firms involved in the agreement. The results show that repeated interaction allows for important gains in equilibrium pay-offs. The optimal solutions are still inefficient from the firms’ perspective, however. The sources of inefficiency include delay in investment outlays, suboptimal levels of investment, and abandonment of profitable projects. Lastly, we consider R&D cooperation between firms that also interact in the product market. In some cases, product market interaction is irrelevant from the perspective of optimal R&D agreements. In other cases, optimal agreements imply that firms behave more aggressively in the product market.

Suggested Citation

  • Cabral, Luís M B, 1996. "R&D Alliances as Non-cooperative Supergames," CEPR Discussion Papers 1439, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1439
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    Citations

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    Cited by:

    1. Horbulyk, Theodore M., 2000. "Strategy And Incentives In The Compulsory Licensing Of Intellectual Property In Agriculture," Transitions in Agbiotech: Economics of Strategy and Policy, June 24-25, 1999, Washington, D.C. 26011, Regional Research Project NE-165 Private Strategies, Public Policies, and Food System Performance.
    2. Cabral, Luis M. B., 2000. "R&D cooperation and product market competition," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1033-1047, October.
    3. L. Lambertini & C. Iori, 2000. "Joint Venture for Product Innovation and Cartel Stability under Vertical Differentiation," Working Papers 385, Dipartimento Scienze Economiche, Universita' di Bologna.

    More about this item

    Keywords

    R&D Alliances; Supergames;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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