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Article contents
Entry Deterrence Through Cooperative R&D Over-Investment
Published online by Cambridge University Press: 09 January 2015
Summary
We highlight conditions under which R&D agreements may harm consumers by increasing final prices. This occurs although members of the R&D agreement increase their R&D efforts. We focus on cases where firms compete both on the final market and to buy an input necessary for R&D. The market is composed of a competitive fringe and two strategic firms that enjoy a first mover advantage on both markets. By increasing its R&D input purchase, a strategic firm increases the cost of all its rivals and in particular deters entry in the fringe. This reduces downstream competition and increases the final price. Therefore, an R&D agreement may induce strategic overbuying of R&D input by members of the agreement at the expense of rival firms and consumers.
Nous mettons en évidence des conditions sous lesquelles un accord de recherche et développement (R&D) peut augmenter les prix finaux et ainsi être néfaste aux consommateurs, bien qu’il conduise les entreprises membres de l’accord à augmenter leurs efforts de recherche et développement. Nous nous intéressons à un cas dans lequel les entreprises se font concurrence à la fois sur le marché aval et sur le marché amont, où elles achètent toutes le même facteur de production nécessaire pour faire de la R&D. Le secteur est composé d’une frange concurrentielle et de deux entreprises stratégiques, qui prennent leurs décisions avant la frange sur les deux marchés. Quand une entreprise stratégique augmente sa demande pour l’input nécessaire aux activités de recherche et développement, cela augmente le coût de toutes ses concurrentes, et rend ainsi plus difficile l’entrée de nouvelles entreprises dans la frange concurrentielle. Ceci conduit à une baisse de la concurrence sur le marché aval, et augmente le prix final. Par conséquent, un accord de recherche et développement peut permettre aux entreprises membres de l’accord de mettre en place une stratégie de sur-achat de l’input nécessaire aux activités de recherche et développement, aux dépens des entreprises concurrentes et des consommateurs.
Keywords
- Type
- Research Article
- Information
- Recherches Économiques de Louvain/ Louvain Economic Review , Volume 79 , Issue 2 , June 2013 , pp. 5 - 26
- Copyright
- Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2013
Footnotes
*
Düsseldorf Institute for Competition Economics (DICE), Heinrich Heine Universität Düsseldorf, Gebäude 24.31, Universitätsstr. 1, 40225 Düsseldorf, Germany; christin@dice.uni-duesseldorf.de, tel: +49 211 81 10 233. Support from the Düsseldorf Institute for Competition Economics (DICE) and from the French-German cooperation project “Market Power in Vertically Related Markets” funded by the Agence Nationale de la Recherche (ANR) and the Deutsche Forschungsgemeinschaft (DFG) is gratefully acknowledged. I would like to thank Marie-Laure Allain, Eric Avenel, Claire Chambolle, Patrick DeGraba, Bruno Jullien, Laurent Linnemer, Guy Meunier, Matias Nunez, Jean-Pierre Ponssard, Patrick Rey, Bernard Sinclair-Desgagné and two anonymous referees as well as participants at IIOC 2010, EARIE 2010 and JMA 2010 conferences for very useful comments.
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