Absract:

We investigate the impact of R&D organisational structure on firms’ innovation activities, profits, and social welfare, when the outcome of R&D is uncertain and the probability of a successful outcome is endogenous. Firms are facing a Pigouvian tax on their emissions and by undertaking abatement activities (green R&D) can eliminate the payment of this tax if they are successful. Firms can undertake green R&D independently or coordinate their R&D expenditures with or without information-sharing. We consider firms preferences for cooperation and identify the conditions needed for cooperation to be the privately preferred outcome. We first explore these issues in a general model

Subsequently we further elaborate on social preferences and consider welfare comparisons by using a standard Cournot model suitably adapted to account for abatement.

Subsequent ex-post asymmetries combined with an endogenous treatment of the probability of R&D success provide a novel analytical framework that challenges some of the typical results obtained in deterministic models of R&D, an additional strategic element is introduced when considering uncertainty in firms’ emissions abatement R&D efforts.

Joint work with Heiko Gerlach and Jorge Perreira

Location:

Room 2E29, CEPS ENS Paris-Saclay
4 avenue des Sciences, 91190, Gif-sur-Yvette