The paper investigates the stability and efficiency of R&D collaboration in a three firm
Hotelling game. Firms are assumed to be horizontally and vertically differentiated
and to provide public services where price is thus set by the regulator. We show that
firm-quality effort decreases with the number of links. Nonetheless, a conflict between
stability and efficiency is likely to occur. We show that the complete network is uniquely
stable but efficient only for a sufficiently low level of spillover rate. As a result, an overconnection
problem may arise. However, for high spillover rates, the welfare-superior
networks tend to be denser provided that the horizontal differentiation is low.
DI DIO Fabio;
CORREANI Luca;
2019-01-16
ECONOMICS BULLETIN
JRC111638
1545-2921,
http://www.accessecon.com/Pubs/EB/2019/Volume39/EB-19-V39-I1-P14.pdf,
https://publications.jrc.ec.europa.eu/repository/handle/JRC111638,
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