R&D Incentives in Vertically Related Markets

This paper focuses on incentives to invest in research and development (R&D) in vertically related markets. In a bilateral duopoly setup, we consider how process R&D incentives of the firms in both upstream and downstream market depend on the intensity of simultaneous interbrand and intrabra...

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Bibliographic Details
Published in:MAGKS - Joint Discussion Paper Series in Economics (Band 07-2013)
Main Authors: Memar, Ahmad Reza Saboori, Götz, Georg
Format: Article
Language:English
Published: Philipps-Universität Marburg 2013
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Online Access:PDF Full Text
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Summary:This paper focuses on incentives to invest in research and development (R&D) in vertically related markets. In a bilateral duopoly setup, we consider how process R&D incentives of the firms in both upstream and downstream market depend on the intensity of simultaneous interbrand and intrabrand competition. Among the results: both interbrand and intrabrand competition have twofold effects on R&D incentives. Existence of a vertically related market with imperfect competition lowers both the incentives to invest in process R&D and the competitive advantage through the R&D investment. We will show how the impact of a firm's R&D investments in either market on consumer surplus as well as on the profits of all firms in both markets depends on exogenous parameters.
ISSN:1867-3678
DOI:10.17192/es2024.0170