Cooperating in R&D and Advertising

Title: Cooperating in R&D and Advertising
Authors: Pourkarmi, Parisa
Atallah, Gamal
Date: 2019
Abstract: This paper studies the impact of cooperative R&D and advertising on innovation and welfare in a duopolistic industry. The model incorporates two symmetric firms producing differentiated products. Firms invest in R&D and advertising in the presence of R&D spillovers and advertising spillovers. Advertising spillovers may be positive or negative. Four cooperative structures are studied: no cooperation, R&D cooperation, advertising cooperation, R&D and advertising cooperation. R&D spillovers and advertising spillovers always increase innovation and welfare if products are highly differentiated and/or spillovers are sufficiently high. The ranking of cooperation settings in terms of R&D, profits and welfare depends on product differentiation, R&D spillovers and advertising externalities. Firms always prefer cooperation on both dimensions, which is socially beneficial only when advertising and R&D spillovers are sufficiently high.
CollectionÉconomie - Publications // Economics - Working Papers
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