We 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 show that an extension of the cooperative agreement in R&D towards collusion in the product market is not necessarily welfare reducing: if firms collude, they (i) develop further a wider range of initial technologies, (ii) invest more in R&D such that process innovations are pursued more quickly, and (iii) abandon the technology for a smaller set of initial marginal costs. We also discuss the implications of our analysis for antitrust policy.
- Antitrust policy,
- R&D Cooperatives
Available at: http://works.bepress.com/hinloopen/4/