Jacek Prokop

Department of Business Economics, Warsaw School of Economics

Poland

jacek.prokop@sgh.waw.pl

R&D spillovers and cartelization of industries with differentiated products

Adam Karbowski

Department of Business Economics, Warsaw School of Economics

Poland

adam.karbowski@sgh.waw.pl

Abstract. The objective of this article is to investigate the impact of research and development (R&D) spillovers on cartelization of industries characterized by differentiated products. For simplicity, we focus on the duopoly market in which firms compete according to the Stackelberg leadership model. Numerical analysis shows that as long as products offered on the market are at least slightly differentiated, it is beneficial for firms to cooperate at the R&D stage, and form a cartel at the final product market. The threat of cartelizing industry is not present only under fully homogenous goods’ competition. But, since the vast majority of product markets trade in differentiated goods,  tightening cooperation in R&D generates a serious threat of industry cartelization. Thus, significant antitrust issues emerge.

Received: February, 2018

1st Revision: May, 2018

Accepted: August, 2018

DOI: 10.14254/2071-

8330.2018/11-3/4

JEL Classification: L13, L41, O31

Keywords: R&D spillovers, industry cartelization, Stackelberg competition, heterogeneous products, linear cost functions