This paper examines the strategic implications of research joint ventures (RJVs) in an oligopolistic setting with R&D spillovers, focusing on their impact on social welfare. Using the well-known R&D model of d’Aspremont-Jacquemin (AJ), we analyze different R&D cooperation structures: the non-cooperative regime, the R&D cartel regime, the cartelized RJV, and the non-cooperative RJV. Our findings challenge conventional views on the efficiency of RJVs. While the model of Kamien-Muller-Zang (KMZ) consistently predicts that RJVs lead to lower social welfare, we show that in the AJ framework, an RJV can outperform both the standard non-cooperative and cartel regimes when spillovers remain below a certain threshold. This result underscores the importance of model-specific assumptions in assessing R&D cooperation policies and offers valuable insights for industrial policy and antitrust regulation in innovation-driven markets.

We study the symmetric volunteer’s dilemma with binary actions and cost sharing, where the volunteering cost is split equally among volunteers. In the one-shot game, all pure-strategy Nash equilibria involve a single volunteer, while Pareto optimality allows any non-zero number. In the infinitely repeated game, all Pareto optima can be sustained in a subgame-perfect Nash equilibrium based on a grim-trigger strategy: trivially under undiscounted payoffs, and provided the discount factor exceeds a threshold under discounted payoffs. This threshold is non-monotonic in the number of volunteers; it is zero with one volunteer, highest with two, and decreases with both more volunteers beyond two and more players. Thus, the scope for tacit cooperation is universal with one volunteer, minimal with two, then improving as more join in, all the way to universal again only in the limit with more and more players and volunteers. Considering efficiency, scope for cooperation and equity/focality as criteria, the grand coalition of volunteers emerges as the best cooperation scenario.

This paper considers a one-stage Cournot duopoly of R&D. We characterize the Nash equilibrium of the one-stage game and provide a comparison with the two-stage version of the same Cournot model of R&D/product market competition. We look at R&D expenditures, profits, output and welfare. Under perfect symmetry, the one-stage model always leads to higher profits when the spillover parameter is not equal to 1/2. Moreover, the one-stage model implies more R&D expenditure and higher welfare if and only if the spillover parameter is greater than 1/2. The insights are robust to an n -firm generalization, but the differences between the one-stage game and the two-stage game disappear as the market becomes perfectly competitive.

We construct a vertical product differentiation duopoly model incorporating managerial delegation and cross-ownership. By exploring the interplay of these factors, we find a U-shaped relationship between endogenous managerial delegation coefficients and cross-ownership. The difference in managerial delegation coefficients between the two firms decreases as the cross-ownership proportion increases. In an ownership structure involving cross-ownership of firms producing different quality products, managerial delegation improves firms’ profits while reducing consumer surplus and social welfare in a vertical product differentiation market. Moreover, cross-ownership intensifies the positive impact of managerial delegation on joint profits and the negative effects on consumer surplus and social welfare. Consequently, regulating cross-ownership among firms in vertically differentiated product markets is an important policy issue for competition law.

This study examines the impact of network externalities on the market performance of vertically differentiated luxury products. Luxury consumption triggers vanity-driven utility, which decreases due to the snob effect as market share expands. By employing a duopoly model under price competition, we demonstrate that a higher degree of network externalities enhances high-quality product market share, price, and profit while reducing those for low-quality products. The crowding-out of high-quality products on low-quality products becomes more pronounced as network externalities increase. We analyze the effects of quality improvement on equilibrium outcomes, revealing that a moderate reduction in the quality gap benefits social welfare. In contrast, a marginal gap leads to a lose-lose situation for firms. Our study underscores the importance of retaining low-quality products and adopting quality promotion strategies for high-quality products.

This paper provides a thorough second-best welfare analysis of the standard two-stage model of R&D/product market competition with R&D spillovers. The planner's solution is compared to the standard non-cooperative scenario, the R&D cartel, and the cartelized research joint venture (or joint lab). We introduce the notion of a social joint lab, as a way for the planner to avoid wasteful R&D duplication. With no spillovers, the non-cooperative scenario, the joint lab, and the second-best planner's solutions coincide. However, with spillovers, all three scenarios yield R&D investments that fall short of the socially optimal level. To shed light on the role of the spillover level on these comparisons, we observe that the gaps between the market outcomes and the planners solutions widen as the spillover parameter increases. Finally, we establish that a social planner and a social joint lab solutions may be achieved starting from any of the three scenarios by offering firms respective suitably weighted quadratic R&D subsidization schedules.