Nihon University

A Dynamic Model of R and D in Oligopoly with Spillovers

Email address: kshinji@eco.nihon-u.ac.jp

Keywords: R and D,spillovers,differential game

Abstract:
We develop a dynamic model of oligopoly in which firms' R and D investments have spillover effects. We show that there exists a unique symmetric stable equilibrium. We compare equilibrium under R and D competition with equilibrium under R and D cooperation and find that for small spillovers, each firm's R and D investments are larger under R and D competition than under R and D cooperation. We also show that in the limit when the discount rate goes to zero, the stability condition for our dynamic game approaches the stability condition for the static two-stage game in Daspremont and Jacquemin (1988). Thus our differential game model of R and D with spillovers may be thought of as a dynamic extension of Daspremont and Jacquemin.

PDF file of paper: kobayashi.pdf

Session: Industrial Organization Theory II

Time: Saturday, 7 July, 2:15pm - 3:45pm

Room: D