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Byline: Minjae Song (1)
In this article I construct a dynamic oligopoly model of research
joint ventures (RJVs) where firms, investing to improve product quality,
fully share the rewards of research success. RJVs benefit firms by
eliminating duplicative research efforts, but firms also give up the
possibility of becoming a solo innovator. Consumers benefit from lower
prices, but may have to wait longer for new products to arrive. I show
that RJVs are welfare enhancing by quantitatively evaluating these
trade-offs with data from the semiconductor industry. I also analyze how
changes in product market competition affect research cooperation.
([dagger])University of Rochester, U.S.A.