Article ID Journal Published Year Pages File Type
5053196 Economic Modelling 2017 11 Pages PDF
Abstract

•R&D networks among vertically related firms are common empirically.•We develop a model to study the formation of R&D networks among manufacturers and their suppliers.•Private and social incentives to form vertical R&D networks align when vertical relations are non-exclusive, but may conflict when vertical relations are exclusive.•We discuss policy implications in terms of antitrust regulation of exclusive vertical relations.

Empirical evidence documents that R&D networks among vertically related firms are very common. Yet there is currently no formal modeling of such networks. In this paper, we develop a model of R&D networks among manufacturers and their suppliers in order to examine which network architectures emerge in equilibrium, and what their implications are from a welfare viewpoint. Our analysis reveals that private incentives to form R&D networks align with societal ones when vertical relations are non-exclusive, but may conflict when vertical relations are exclusive. In terms of policy, stricter antitrust regulation of exclusive vertical relations may, under certain conditions, be desirable from a social viewpoint.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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