Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Thursday, February 25, 2021

Cooperative R&D with Differentiated Products in Vertically Related Industries

Cooperative R&D with Differentiated Products in Vertically Related Industries

By:

Gamal Atallah (Department of Economics, University of Ottawa, Ottawa, ON); Parisa Pourkarimi (Department of Economics, Carleton University)

Abstract:

This paper studies the impact of cooperative R&D on innovation, welfare, and profitability in vertically related industries where products are differentiated. The model incorporates two vertically related industries, with horizontal spillovers within each industry and vertical spillovers between the two industries. Upstream firms produce a homogeneous intermediate good, while downstream firms provide differentiated products. Three types of R&D cooperation are studied: no cooperation, horizontal cooperation, and vertical cooperation. The comparison of cooperation settings in terms of R&D and of profitability shows that although vertical cooperation yields higher innovation and welfare, it may lead firms to over–invest in R&D.

URL:

http://d.repec.org/n?u=RePEc:ott:wpaper:2007e&r=com

https://lawprofessors.typepad.com/antitrustprof_blog/2021/02/cooperative-rd-with-differentiated-products-in-vertically-related-industries.html

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