Sequencing R&D decisions in a two-period duopoly with spillovers |
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Authors: | Madjid Amir Rabah Amir Jim Jin |
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Affiliation: | Department of Statistics and Operations Research, King Saud University, P.O.Box 2455, Riyadh 11451, SAUDI ARABIA, SA Department of Economics, University of Southern Denmark, 5230 Odense M, DENMARK (e-mail: raa@sam.sdu.dk), DK Department of Economics, The Queen's University of Belfast, Belfast, BT7 1NN, Northern Ireland, UK (e-mail: j.jin@Queens-Belfast.ac.uk), GB
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Abstract: | Summary. We compare simultaneous versus sequential moves in R&;D decisions within an asymmetric R&;D/Cournot model with linear demand (for differentiated products), general R&;D costs, and spillovers. Simultaneous play and sequential play (with and without a specified leader) can emerge as appropriate formulations, depending on the ratios of spillover rate over demand cross-slope, but not on R&;D efficiency. When at least one ratio is above 1/2, a sequential solution mitigates competition and leads to higher profits for each firm, and to higher social welfare. When uniquely specified, the stronger firm emerges as the R&;D first-mover. |
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