Cooperative and Noncooperative R D in Duopoly with Spillovers and Upstream Input Providers
This paper extends the model in d'Aspremont and Jacquemin (1988) to include upstream input providers. We show that, for a sufficiently large number of input providers, noncooperative R&D investments are higher vis a vis cooperative R&D for any level of spillovers. This contrasts the finding in the literature that cooperative R&D investments are higher with high spillovers. Such result comes as not a surprise in our model because unit cost of production increases as the number of upstream firms goes up. Consequently, both cooperative R&D and noncooperative R&D decline, but the former declines faster than the latter.