Limited Farsightedness in R&D Network Formation
(2021) , 26 pages
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- Abstract
- We adopt the horizon-K farsighted set of Herings, Mauleon and Vannetelbosch (2019) to study the R&D networks that will emerge in the long run when firms are neither myopic nor fully farsighted but have some limited degree of farsightedness. We find that a singleton set consisting of a pairwise stable network is a horizon-K farsighted set for any degree of farsightedness K ≥ 2. That is, each R&D network consisting of two components of nearly equal size satisfies both horizon-K deterrence of external deviations and horizon-K external stability for K ≥ 2. On the contrary, each R&D network consisting of two components with the largest one comprising three-quarters of firms, predicted when all firms are fully farsighted, violates horizon-K deterrence of external deviations. Thus, when firms are homogeneous in their degree of farsightedness, pairwise stable R&D networks consisting of two components of nearly equal size are robust to limited farsightedness.
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Mauleon, A., Sempere-Monerris, J. J., & Vannetelbosch, V. (2021). Limited Farsightedness in R&D Network Formation (LIDAM Discussion Paper CORE 2021/06). https://hdl.handle.net/2078.5/166234