Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/214735
Authors: 
Karbowski, Adam
Year of Publication: 
2019
Citation: 
[Journal:] Decyzje [ISSN:] 2391-761X [Volume:] 32 [Year:] 2019 [Pages:] 63-76
Abstract: 
The aim of this paper is to investigate the firms' incentives to engage in process R&D under vertical industrial setting, when the raising rivals' cost effect is present. We show that R&D investment of the downstream duopoly firm raises the rival's marginal costs of production. The downstream R&D behavior can give rise to the symmetric investment games, i.e., the prisoner's dilemma, the deadlock game and the harmony game, between downstream competitors. If the costs of the R&D investments made by the downstream firms are large enough, the downstream firms can participate in the harmony game, which results in the investment hold-up or the creation of the R&D-avoiding cartel. For more R&D-efficient downstream firms, the downstream investment game can end up in the prisoner's dilemma or the deadlock game. In the prisoner's dilemma, both downstream firms invest in R&D, but such a behavior is not Pareto optimal. In the prisoner's dilemma, greed and fear make firms invest in R&D. In the deadlock game, both downstream firms invest in R&D, and such a behavior is Pareto optimal. The R&D investments are not induced by any social tension (greed or fear).
Subjects: 
Research and development
investments
prisoner’s dilemma
deadlock game
harmony game
JEL: 
O3
Persistent Identifier of the first edition: 
Document Type: 
Article
Document Version: 
Published Version

Files in This Item:
File
Size
223.52 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.