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DEPOCEN Working Paper Series
Le Duc Niem, 2014. "Research and Development Cooperation Between Rivals: A Novel Motive beyond New Knowledge"
   
Abstract:
The paper examines a motive for R&D cooperation with a rival by considering the behavior of a quality follower in a model of vertically differentiated products. We show that, in some settings, a quality follower has an incentive to contribute money to R&D activity of a quality leader with the sole purpose of making the leaderís products even better. The reason behind this motivation is that the leaderís product quality is serving as an upper-constraint in the decision process of the follower regarding product quality selection. Thus, if the leaderís product quality is raised both firms will be better off.
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