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R&D Spillovers on a Salop Circle
Author(s) -
Lamantia Fabio,
Pezzino Mario
Publication year - 2016
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.2734
Subject(s) - multinational corporation , competition (biology) , economics , welfare , microeconomics , quality (philosophy) , monetary economics , biology , market economy , ecology , finance , physics , quantum mechanics
The paper describes quality/price equilibrium and welfare effects of R&D spillovers when firms are located around the circumference of a Salop circle, and the extent of the spillovers may depend on the geographic proximity between firms. In particular, we show that an increase in competition may have a positive effect on the provision of quality and firms' profits. We also extend the model allowing a multinational enterprise to locate at the centre of the circle. In this scenario it is important to understand the interplay of local R&D spillovers with the spillovers that propagate from and to the centre. Copyright © 2015 John Wiley & Sons, Ltd.