R&D Subsidies, Research Joint Ventures, and Industry Concentration
19 Pages Posted: 21 Jan 2002
Date Written: September 27, 2002
Abstract
We show that the presumed incompatibility of R&D and competition in Spence (1984) is not fundamental, but hinges on a critical modeling choice. Specifically, we show that for a widely used class of R&D technology, that is, the functional form mapping R&D effort into cost reduction, the incompatibility disappears and Spence's subsidy-based solution becomes a viable alternative to Research Joint Ventures (RJVs). This is the case especially if RJVs carry with them a risk of cartelization, a risk we show to be particularly high for the models used in this literature, if only their simplifying restriction to symmetric firms is dropped.
Note: Previously titled "Duplication of R&D and Industry Concentration"
Keywords: Research and Development, Research Joint Ventures, Process Innovation Games
JEL Classification: D43, L1, O32
Suggested Citation: Suggested Citation