Author(s): Le Duc Niem
Journal: Technology and Investment
ISSN 2150-4059
Volume: 02;
Issue: 01;
Start page: 47;
Date: 2011;
Original page
Keywords: Product Quality | R&D Cooperation | Knowledge | Motive
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 leader’s products even better. The reason behind this motivation is that the leader’s product quality is serving as an upper-constraint in the decision process of the follower regarding product quality selection. Thus, if the leader’s product quality is raised both firms will be better off.
Journal: Technology and Investment
ISSN 2150-4059
Volume: 02;
Issue: 01;
Start page: 47;
Date: 2011;
Original page
Keywords: Product Quality | R&D Cooperation | Knowledge | Motive
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 leader’s products even better. The reason behind this motivation is that the leader’s product quality is serving as an upper-constraint in the decision process of the follower regarding product quality selection. Thus, if the leader’s product quality is raised both firms will be better off.
