Downstream R&D Rivalry with Spillovers and Discriminatory Input Pricing
Resource
Australian Economic Papers,47(4),376-388.
Journal
Australian Economic Papers
Journal Issue
47
Pages
376-388
Date Issued
2008-12
Author(s)
Abstract
This paper examines how discriminatory input pricing by the upstream monopolist affects the R&D choices of downstream duopolists in the presence of R&D spillovers. We show that the monopoly supplier can benefit from a precommitment to uniform pricing because under uniform pricing the downstream firms invest more in R&D, leading to larger output and thus benefiting the supplier. When R&D spillovers are sufficiently large, the downstream firms are also better off under uniform pricing. Moreover, social welfare is always higher under uniform pricing.
SDGs
Type
journal article