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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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
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Abstract 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.
AbstractList 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.
Author Muminov, Timur K.
Lee, Sang-Ho
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  surname: Lee
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  givenname: Timur K.
  surname: Muminov
  fullname: Muminov, Timur K.
  organization: Management Development Institute of Singapore in Tashkent
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crossref_primary_10_1002_mde_3822
crossref_primary_10_1111_1467_8454_12307
crossref_primary_10_1111_boer_12440
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Endogenous R&D timing game
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Private duopoly
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R&D spillovers
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Snippet This study investigates an endogenous R&D timing game between duopoly firms which undertake cost-reducing R&D investments simultaneously or sequentially, and...
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StartPage 505
SubjectTerms 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
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  providerName: Springer Nature
Title Endogenous Timing of R&D Decisions and Privatization Policy with Research Spillovers
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