Journal article
Does the Cost Paradox Preclude Technological Progress under Imperfect Competition?
Journal of public economic theory, Vol.19(1), pp.81-96
02/2017
DOI: 10.1111/jpet.12199
Abstract
We consider a two-stage model of R&D/Cournot competition with isoelastic demand satisfying the cost paradox (i.e., that equilibrium profits increase with unit cost). The R&D process has a binary structure, with spillover effects. We provide a negative answer to the question in the title: Under noncooperative R&D, firms will conduct R&D for a broad parameter range, despite the presence of the cost paradox, as a result of being caught in a prisoner's dilemma. A second-best social planner is shown to have a higher propensity for R&D than the noncooperative scenario. However, if firms engaged in any of the known R&D cooperation scenarios, the answer to the question in the title would become affirmative. It follows that R&D cooperation leads to lower producer and consumer surpluses. This constitutes a major departure from the conclusions of the standard R&D model. Therefore, R&D cooperation in such environments should not receive favorable antitrust treatment.
Details
- Title: Subtitle
- Does the Cost Paradox Preclude Technological Progress under Imperfect Competition?
- Creators
- Rabah Amir - University of IowaChristine Halmenschlager - Université Paris-Panthéon-AssasMalgorzata Knauff - SGH Warsaw School of Economics
- Resource Type
- Journal article
- Publication Details
- Journal of public economic theory, Vol.19(1), pp.81-96
- Publisher
- Wiley
- DOI
- 10.1111/jpet.12199
- ISSN
- 1097-3923
- eISSN
- 1467-9779
- Number of pages
- 16
- Language
- English
- Date published
- 02/2017
- Academic Unit
- Economics
- Record Identifier
- 9984380504402771
Metrics
3 Record Views