Monday, July 27, 2015
Jeroen Hinloopen (University of Amsterdam); Grega Smrkolj (University of Amsterdam) and Florian Wagener (University of Amsterdam) have written In Defense of Trusts: R&D Cooperation in Global Perspective.
ABSTRACT: We present a continuous-time generalization of the seminal R&D model of d’Aspremont and Jacquemin (American Economic Review, Vol. 78, No. 5) to examine the trade-off between the benefits of allowing firms to cooperate in R&D and the corresponding increased potential for product market collusion. We consider all trajectories that are candidates for an optimal solution as well as initial marginal cost levels that exceed the choke price. Firms that collude develop further a wider range of initial technologies, pursue innovations more quickly, and are less likely to abandon a technology. Product market collusion could thus yield higher total surplus.