Three Essays on Research Joint Ventures, Coordination Costs and Environmental R&D

Abstract

This dissertation is about research and development (R&D) and formation of research joint ventures (RJV). The first chapter analyzes R&D competition and cooperation regimes with coordination costs under full information sharing and no spillovers in a Stackelberg model. The findings show that profits and R&D incentives of RJV members decrease with coordination costs. R&D cooperation of leaders results in higher profits for insiders and also higher welfare compared with R&D competition. Checking the robustness of the results shows that with R&D spillovers and no information sharing no RJV forms. With convex costs, an RJV containing all leaders forms. The second chapter considers a duopoly Cournot model where production may result in environmental damage. Firms can either invest in process or environmental R&D. In the first case, we assume an exogenous emission tax. With high enough emission tax, welfare is always higher under public R&D than cooperation. Under endogenous emission tax, when the regulator acts before firms’ decision on R&D, with high R&D spillovers, public R&D yields higher welfare than R&D cooperation. When the regulator sets the emission tax after firms’ decision on R&D, welfare under R&D cooperation is higher than public R&D. Comparison of commitment and no commitment also shows that commitment increases private R&D. Chapter three investigates the endogenous formation of coalitions under the size announcement game in a Cournot framework and analyzes the effect of coordination costs on equilibrium and optimal coalitions. When there are industry-wide R&D spillovers numerical simulations show that with high enough coordination costs no RJV forms in equilibrium, which also maximizes welfare. When there is intra coalition full information sharing and no inter-coalitions R&D spillovers with high enough coordination costs, the equilibrium coalition structure is more concentrated than when coordination costs are low and the size is higher than when RJVs could not form endogenously. Also, with high enough coordination costs, the welfare maximizing coalition is less concentrated than the equilibrium one while the opposite is true for low coordination costs.