- Product market competition and investments in cooperative R&D
- The B.E. Journal of Economic Analysis & Policy
- Volume | Issue number
- 11 | 1
- Article number
- Number of pages
- Document type
- Faculty of Economics and Business (FEB)
- Amsterdam School of Economics Research Institute (ASE-RI)
Building on the framework developed by Qiu (1997) we investigate the influence of product market competition on incentives to invest in cooperative R&D. For that we disentangle the three components that make up the combined-profits externality. The strategic component is always negative and the size component is always positive. The spillover component is negative (positive) with Bertrand (Cournot) competition. Cournot competition thus yields more cooperative R&D, which could drive the Cournot-Nash price below the Bertrand-Nash price. Our decomposition also explains why, under Cournot competition, cooperative R&D exceeds non-cooperative R&D only if spillovers are high enough.
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