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Article
Research and Development Cooperatives and Market Collusion: A Global Dynamic Approach
Journal of Optimization Theory and Applications (2017)
  • Jeroen Hinloopen
  • Grega Smrkolj
  • Florian Wagener, University of Amsterdam
Abstract
We present a continuous-time generalization of the seminal research and development model of d’Aspremont and Jacquemin (Am Econ Rev 78(5):1133–1137, 1988) to examine the trade-off between the benefits of allowing firms to cooperate in research and the corresponding increased potential for product market collusion. We
show the existence of a solution to the optimal investment problem using a combination of results from viscosity theory and the theory of planar dynamical systems. In particular, we show that there is a critical level of marginal cost at which firms are indifferent between doing nothing and starting to develop the technology.We find
that colluding firms 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.
Keywords
  • Antitrust policy,
  • Bifurcations,
  • Collusion,
  • R&D Cooperatives
Publication Date
March, 2017
DOI
10.1007/s10957-017-1133-0
Citation Information
Jeroen Hinloopen, Grega Smrkolj and Florian Wagener. "Research and Development Cooperatives and Market Collusion: A Global Dynamic Approach" Journal of Optimization Theory and Applications Vol. 174 Iss. 2 (2017) p. 567 - 612 ISSN: 1573-2878
Available at: http://works.bepress.com/hinloopen/4/