PL EN


Journal
2019 | 32 |
Article title

Greed and Fear in Downstream R&D Games

Authors
Content
Title variants
Languages of publication
EN
Abstracts
EN
The aim of this paper is to investigate the fi rms’ incentives to engage in process R&D under vertical industrial setting, when the raising rivals’ cost effect is present. We show that R&D investment of the downstream duopoly fi rm raises the rival’s marginal costs of production. The downstream R&D behavior can give rise to the symmetric investment games, i.e., the prisoner’s dilemma, the deadlock game and the harmony game, between downstream competitors. If the costs of the R&D investments made by the downstream fi rms are large enough, the downstream fi rms can participate in the harmony game, which results in the investment hold-up or the creation of the R&D-avoiding cartel. For more R&D-effi cient downstream fi rms, the downstream investment game can end up in the prisoner’s dilemma or the deadlock game. In the prisoner’s dilemma, both downstream fi rms invest in R&D, but such a behavior is not Pareto optimal. In the prisoner’s dilemma, greed and fear make fi rms invest in R&D. In the deadlock game, both downstream fi rms invest in R&D, and such a behavior is Pareto optimal. The R&D investments are not induced by any social tension (greed or fear).
PL
The aim of this paper is to investigate the fi rms’ incentives to engage in process R&D under vertical industrial setting, when the raising rivals’ cost effect is present. We show that R&D investment of the downstream duopoly fi rm raises the rival’s marginal costs of production. The downstream R&D behavior can give rise to the symmetric investment games, i.e., the prisoner’s dilemma, the deadlock game and the harmony game, between downstream competitors. If the costs of the R&D investments made by the downstream fi rms are large enough, the downstream fi rms can participate in the harmony game, which results in the investment hold-up or the creation of the R&D-avoiding cartel. For more R&D-effi cient downstream fi rms, the downstream investment game can end up in the prisoner’s dilemma or the deadlock game. In the prisoner’s dilemma, both downstream fi rms invest in R&D, but such a behavior is not Pareto optimal. In the prisoner’s dilemma, greed and fear make fi rms invest in R&D. In the deadlock game, both downstream fi rms invest in R&D, and such a behavior is Pareto optimal. The R&D investments are not induced by any social tension (greed or fear).
Journal
Year
Issue
32
Physical description
Dates
published
2019
online
2020-03-06
Contributors
References
Document Type
Publication order reference
Identifiers
YADDA identifier
bwmeta1.element.ojs-doi-10_7206_DEC_1733-0092_131
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