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Clark, Derek J.
Sand, Jan Yngve
Year of Publication: 
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Economics Discussion Papers / Institut für Weltwirtschaft 2009-28
This paper analyses the endogenous formation of technology sharing coalitions with asymmetric firms. Coalition partners produce complementary technology advancements, although each firm determines its R&D investment level non-cooperatively and there is no co-operation in the product market. We show that the equilibrium coalition outcome is either one between the two most efficient firms, or a coalition with all three firms. The two-firm coalition is the preferred outcome of a welfare maximising authority if ex ante marginal cost is sufficiently high, and the three-firm coalition is preferred otherwise. Furthermore, we show that the equilibrium outcomes result in the lowest total R&D investment of all possible outcomes. Aircraft engine manufacturing provides a case study, and indicates the importance of anti-trust issues as an addition to the theory.
endogenous coalitions
asymmetric firms
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Working Paper

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