Abstract
The paper present a dynamic extension to the static asymmetric model of the competitive R&D and production duopoly subject to knowledge spillovers. Two asymmetric firms are assumed to build their competitive/cooperative strategies in the situation when they operate for a limited period of time and dispose their knowledge capital in the end. Solutions are derived from the linear-quadratic dynamic games. This study concludes that two agents conduct their R&D and production asymmetrically. Agents prefer the R&D-cooperative strategy over the competitive one regardless the intensity of knowledge spillovers. The preferences of the social planner depend on the intensity of such spillovers. Regulator prefers the competitive behavior when spillovers are weak, and R&D-cooperation when knowledge spillovers are strong.
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