Abstract
This paper analyzes the equilibrium level of product differentiation and aggregate welfare from non-cooperation and two different cooperation of product R&D in an international duopoly model. It is shown that: (i) The equilibrium level of product differentiation in harmonization with product R&D is higher than that in R&D competition; (ii) The equilibrium level of product differentiation in harmonization with product R&D is higher than asymmetry with product R&D; (iii) The equilibrium level of product differentiation in R&D competition is higher than asymmetry with product R&D; (iv) If transport cost is sufficiently high, aggregate welfare in R&D competition is higher than that of harmonization with product R&D; (v) If transport cost is sufficiently high, aggregate welfare in asymmetry with product R&D is higher than that of harmonization with product R&D; and (vi) If transport cost is sufficiently high, aggregate welfare in asymmetry with product R&D is higher than that in R&D competition.
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