R&D and market sharing agreements

We analyze the formation of R&D alliances and market sharing (MS) agreements by which firms commit not to enter in each other’s territory in oligopolistic markets. We show that R&D alliance structures are stable only in the presence of MS agreements. Thus, long lasting R&D alliances could signal the existence of some MS agreement in the industry. We characterize the set of stable symmetric pairs of coalition structures with identical R&D and MS structure. In addition, we show the stability of a class of asymmetric pairs of coalition structures where the most efficient firms form both an R&D and a MS agreement while the other firms do not form any MS agreement but form two smaller R&D alliances. Even though MS agreements are detrimental for consumers, we show that the stable pairs of coalition structures are a better outcome for consumers than no cooperation at all.

Affiliations

UCLouvainSSH/LIDAM/CORE - Center for operations research and econometrics

Citations

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Dollinger, J., Mauleon, A., & Vannetelbosch, V. (2024). R&D and market sharing agreements. Economic Theory. Accepted/in-press. https://doi.org/10.1007/s00199-024-01554-z (Original work published 2024)