Open AccessCOOPERATIVE R&D WITH DIFFERENTIATED PRODUCTS IN VERTICALLY RELATED INDUSTRIES
Author(s) -
Parisa Pourkarimi
Publication year - 2020
Publication title -
ekonomska revija/economic review
Language(s) - English
Resource type - Journals
eISSN - 2303-680X
pISSN - 1512-8962
DOI - 10.51558/2303-680x.2020.18.2.3
Subject(s) - profitability index , upstream (networking) , horizontal and vertical , downstream (manufacturing) , homogeneous , industrial organization , vertical integration , business , welfare , product differentiation , investment (military) , economics , market economy , marketing , engineering , telecommunications , mathematics , finance , geometry , combinatorics , politics , political science , law
This paper studies the impact of cooperative R&Doninnovation, welfare, and profitability in verticallyrelated industries with differentiated products. Themodel incorporates two vertically related industries,with horizontal spillovers within industries andvertical spillovers between them. Upstream firmsproduce a homogeneous intermediate good, whiledownstream firms provide differentiated products.Three types of R&D cooperation are studied: nocooperation, horizontal cooperation, and verticalcooperation. The comparison of cooperation settingsin terms of R&D and profitability shows thatalthough vertical cooperation yields higherinnovation and welfare, it may lead to over–investment in R&D.