Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87480
Authors: 
Hinloopen, Jeroen
Smrkolj, Grega
Wagener, Florian
Year of Publication: 
2013
Series/Report no.: 
Tinbergen Institute Discussion Paper 13-045/II
Abstract: 
We examine the trade-off between the benefits of allowing firms to cooperate in R&D and the corresponding increased potential for product market collusion. For that we utilize a dynamic model of R&D whereby we consider all possible initial marginal cost levels (technologies), including those that exceed the choke price. This global analysis yields four possibilities: initial marginal costs are above the choke price and this technology is, or is not, developed further, and initial marginal costs are below the choke price and the technology is, or is not, (eventually) taken off the market. We show that an extension of the cooperative agreement towards collusion in the product market is not necessarily welfare reducing: if firms collude, they (i) develop further a wider range of initial technologies, (ii) invest more in R&D such that process innovations are pursued more quickly, and (iii) abandon the technology for a smaller set of initial marginal costs. We also dis cuss the implications of our analysis for antitrust policy.
Subjects: 
Antitrust policy
Bifurcations
Collusion
R&D cooperatives
Spillovers
JEL: 
D43
D92
L13
L41
O31
O38
Document Type: 
Working Paper

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