Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/195217
Authors: 
Zhao, Kai
Year of Publication: 
2015
Citation: 
[Journal:] Latin American Economic Review [ISSN:] 2196-436X [Volume:] 24 [Year:] 2015 [Issue:] 4 [Pages:] 1-27
Abstract: 
The paper investigates firms' behavior and outcomes (levels of cost-reducing R&D, output, profit and welfare in equilibrium) in a differentiated duopoly with process innovation. One of the important features in this paper is that spillovers operate in the R&D stage and are tied to the degree of product substitutability as well as the extent of technological proximity/alienation of the research paths leading to cost reduction. Using this feature, the paper tries to explore and compare four separate organization setups (Full Competition, Semi-collusion in Production, Semi-collusion in R&D and Full Collusion). It is found that under technological proximity, competitions at the upstream stage depress R&D investment, and firms colluding in R&D regardless of their production strategy always yield more profit and generate higher social welfare than firms colluding in output; under technological alienation, R&D cooperation may reduce firms' interest to invest in R&D, and it is possible that firms in the Full Collusion regime produce most and generate the highest level of social welfare.
Subjects: 
R&D
Spillover
Semi-collusion
Product differentiation
Horizontal merger
JEL: 
D43
L13
O31
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0/
Document Type: 
Article

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