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 stable cooperation in terms of R&D is yet a better outcome for consumers than no cooperation at all.

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Dollinger, J., Mauleon, A., & Vannetelbosch, V. (2023). R&D and Market Sharing Agreements (LIDAM Discussion Paper CORE 2023/04). https://hdl.handle.net/2078.5/273325