Chapter 4 Spillovers, Stable R&D Cooperations, and Social Welfare

This paper analyzes the stability and the welfare properties of R&D cooperations in an oligopolistic market with n firms. It is shown that the sizes of stable coalitions vary significantly with the kind and the actual value of spillovers, the institutional arrangement of cooperation between the firms and the underlying stability concept. Moreover, the welfare maximizing coalition is rarely a stable equilibrium outcome, hence there is scope for political intervention. However, the informational requirements on part of the policy makers are high, and they are at risk to adopt inappropriate measures that are detrimental to social welfare.