Open AccessPrice-Cap Regulation and The Incentive To Cooperate In Research
Author(s) -
Mark W. Frank
Publication year - 1970
Publication title -
journal of business strategies
Language(s) - English
Resource type - Journals
eISSN - 2162-6901
pISSN - 0887-2058
DOI - 10.54155/jbs.28.1.81-95
Subject(s) - incentive , welfare , microeconomics , economics , business , joint (building) , industrial organization , market economy , architectural engineering , engineering
This paper considers the impact of price-cap regulation on R&D and theincentive of firms to form research joint ventures. Using a symmetric two-stageduopoly model of cost-reducing R&D with multiple forms of research cooperation,we find that R&D is greatest when firms fully cooperate in research and share allresearch knowledge. Price-cap regulation, however, appears to have a small butnegative effect on R&D, leading to lower total welfare.