Cooperative R&D investment decisions: A fuzzy real option approach

Abstract

We study the optimal firms' strategies in an R&D oligopoly environment for different types of cooperative agreements under fuzzy uncertainty about the effects of cooperation. We address the problem as an R&D fuzzy bargaining game, in which the firms' fuzzy payoffs are computed using the real exchange option methodology that takes into account the managerial flexibility embedded in the R&D opportunities. The main novelty of our contribution is the parametric description both of the intensity of the collaboration for each dimension involved in the agreement and of its fuzzy impact on the firms' payoffs. Interestingly, we show that the degree of imprecise knowledge has a significant impact on the strategic alliances adopted by firms.