TECHNOLOGY-TRADING COALITIONS IN SUPERGAMES

We attempt to explain the observation that rival firms often share the ir technologies. We show that the trading of technical information ove r the long haul can be sustained as an equilibrium in supergames. The strategy of ejection of a cheating firm from a technology-trading coal ition, followed by the continuation of technology trading by the nonch eating members, better facilitates trading than does a strategy in whi ch cheating results in the dissolution of the coalition. Technology tr ading is often welfare improving, and firms may form small coalitions.