Collusion and research joint ventures

  • Kaz Miyagiwa
  • Published 2006

Abstract

We examine whether cooperation in R&D leads to product market collusion. Suppose firms compete in a stochastic R&D race while maintaining the collusive equilibrium in a repeated-game framework. Innovation creates a cost asymmetry and destabilizes the collusive equilibrium. Firms forming an R&D joint venture can maintain cost symmetries through technology sharing agreement, thereby stabilizing collusion. The stability of post-discovery collusion makes collusion stable in pre-discovery periods. However, formation of R&D cooperatives may increase social welfare because firms share an efficient technology. Interestingly, a welfare improvement is less likely if innovation leads to a large cost reduction. JEL Classifications System Numbers: L12, L13

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Cite this paper

@inproceedings{Miyagiwa2006CollusionAR, title={Collusion and research joint ventures}, author={Kaz Miyagiwa}, year={2006} }