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Licensed Unlicensed Requires Authentication Published by De Gruyter July 23, 2010

R&D-Hindering Collusion

  • Emanuele Bacchiega , Luca Lambertini and Andrea Mantovani


In an extended version of d'Aspremont and Jacquemin's (1988) R&D competition model, we identify a region where the game is a prisoner's dilemma in that region firms' optimal strategy still prescribes to invest in R&D. However, they would obtain a higher profit by not investing at all. A standard Folk Theorem argument suggests that firms implicitly tend to collude and refrain from investing in R&D when their interaction is repeated. When this happens, social welfare shrinks, but we argue that promoting joint research constitutes a remedy to the lack of innovation efforts, rather than the excess thereof.

Published Online: 2010-7-23

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston

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