Abstract
The objective of this research is to investigate the impact of R&D cooperation between firms on industry cartel formation. We consider process R&D investments aimed at reduction of the unit costs of manufacturing. These investments create positive externalities for the competitors. We assume that the competition between rival firms in the industry takes place according to the Stackelberg (quantity) leadership model. For simplicity, we focus on the duopoly symmetric case. Numerical analysis shows that closer cooperation between rivals at the R&D stage strengthens the incentives to create a cartel in the final product market, thus serious public policy concerns occur.
The previous version of this paper is available online as the discussion paper: Prokop and Karbowski (2013) R&D Cooperation and Industry Cartelization. The Economics Discussion Paper Series, 2013–41, The Kiel Institute for the World Economy.
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Notes
- 1.
The models in the form of such games were introduced by d’Aspremont and Jacquemin (1988) and De Bondt and Veugelers (1991). They have been further developed by Kamien et al. (1992), Prokop and Karbowski (2018), Karbowski and Prokop (2018). See also our working paper, as a rough version of the present publication, i.e., Prokop and Karbowski (2013).
- 2.
The R&D block exemption regulation was further extended in 2010. European Commission has considerably extended the scope of the R&D block exemption regulation, which now not only covers R&D activities carried out jointly but also so-called “paid-for research” agreements where one party finances the R&D activities carried out by the other party (EC Press Release Database, Brussels, 14 December 2010).
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Acknowledgements
This research was supported by National Science Centre, Poland (grant number UMO-2017/25/B/HS4/01632).
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Prokop, J., Karbowski, A. (2020). R&D Cooperation Facilitates Cartel Formation. In: Tsounis, N., Vlachvei, A. (eds) Advances in Cross-Section Data Methods in Applied Economic Research. ICOAE 2019. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-38253-7_7
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