Endogenous Timing of R&D Decisions and Privatization Policy with Research Spillovers

This study investigates an endogenous R&D timing game between duopoly firms which undertake cost-reducing R&D investments simultaneously or sequentially, and then play Cournot output competition. We examine and compare equilibrium outcomes in private and mixed markets, respectively, and find...

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Bibliographic Details
Published inJournal of industry, competition and trade Vol. 21; no. 4; pp. 505 - 525
Main Authors Lee, Sang-Ho, Muminov, Timur K.
Format Journal Article
LanguageEnglish
Published New York Springer US 01.12.2021
Springer Nature B.V
Subjects
Alliances
Competition
Duopoly
Economic Policy
Economics
Economics and Finance
Endogenous
Equilibrium
European Integration
Industrial Organization
Innovations
International Economics
Leadership
Microeconomics
Privatization
R & D/Technology Policy
R&D
Research & development
Social welfare
Timing
H21
Endogenous R&D timing game
L32
Private duopoly
Mixed duopoly
R&D spillovers
L13
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Summary:This study investigates an endogenous R&D timing game between duopoly firms which undertake cost-reducing R&D investments simultaneously or sequentially, and then play Cournot output competition. We examine and compare equilibrium outcomes in private and mixed markets, respectively, and find that spillovers rate critically affects contrasting results. We show that a simultaneous-move (sequential-move) appears in a private duopoly if the spillovers rate is low (high) while a sequential-move appears in a mixed duopoly irrespective of spillovers. We also show that public leadership is the only equilibrium if the spillovers rate is intermediate and its resulting welfare is the highest. This suggests that the implementation of privatization policy transforms a public leader to a private competitor, which can decrease the social welfare.
ISSN:1566-1679
1573-7012
DOI:10.1007/s10842-021-00365-5