| By: |
Parisa Pourkarmi (Department of Economics, Carleton University, Ottawa, ON);
Gamal Atallah (Department of Economics, University of Ottawa, Ottawa, ON) |
| Abstract: |
This paper studies the impact of cooperative R&D and advertising on innovation
and welfare in a duopolistic industry. The model incorporates two symmetric
firms producing differentiated products. Firms invest in R&D and advertising
in the presence of R&D spillovers and advertising spillovers. Advertising
spillovers may be positive or negative. Four cooperative structures are
studied: no cooperation, R&D cooperation, advertising cooperation, R&D and
advertising cooperation. R&D spillovers and advertising spillovers always
increase innovation and welfare if products are highly differentiated and/or
spillovers are sufficiently high. The ranking of cooperation settings in terms
of R&D, profits and welfare depends on product differentiation, R&D spillovers
and advertising externalities. Firms always prefer cooperation on both
dimensions, which is socially beneficial only when advertising and R&D
spillovers are sufficiently high. |
| Keywords: |
R&D, Advertising, Cooperation, Spillovers, Product differentiation, Innovation, Marketing. |
| JEL: |
D43 L13 O32 |
| Date: |
2019 |
| URL: |
http://d.repec.org/n?u=RePEc:ott:wpaper:1902e&r=all |