COOPERATIVE AND NONCOOPERATIVE RESEARCH-AND-DEVELOPMENT IN AN OLIGOPOLY WITH SPILLOVERS - STRATEGIC SUBSTITUTES VERSUS STRATEGIC COMPLEMENTS

The positive as well as normative effects of cooperative R&D are exami ned vis-a-vis non-cooperative R&D, socially first-best R&D, and social ly second-best R&D within a two-stage model of oligopolistic competiti on with product differentiation. It is shown, among others, that both non-cooperative and cooperative R&D levels are socially insufficient a t the margin in terms of the first-best as well as second-best criteri on if firms compete in prices, irrespective of whether the number of f irms and the degree of R&D spillovers are large or small.