Sequencing R&D decisions with a consumer-friendly firm and spillovers

Leal, Mariel and Garcia, Arturo and Lee, Sang-Ho (2019): Sequencing R&D decisions with a consumer-friendly firm and spillovers.

Abstract

This study considers a duopoly model in which both a consumer-friendly (CF) firm and a for-profit (FP) firm undertake cost-reducing R&D investments in an endogenous R\&D timing game and then play Cournot output competition. When the CF firm chooses its profit-oriented consumer-friendliness, we show that the consumer-friendliness is non-monotone in spillovers under both simultaneous-move and sequential-move with FP firm’s leadership while it is decreasing under sequential-move with CF firm’s leadership. We also show that a simultaneous-move outcome is a unique equilibrium when the spillovers are low and the CF firm invests higher R&D and obtains higher profits. When the spillovers are not low, two sequential-move outcomes appear and the CF firm might obtain lower profits with higher spillovers under the CF firm leadership.

• Item Type: MPRA Paper
• English Title: cSequencing R&D decisions with a consumer-friendly firm and spillovers
• Language: English
• Keywords: simultaneous R&D decisions; sequential R&D decisions; consumer-friendly firm; R&D spillovers
• Subjects: L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L21 - Business Objectives of the Firm; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M2 - Business Economics > M21 - Business Economics; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O32 - Management of Technological Innovation and R&D

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