The objective of this project is to evaluate the economic consequences of cooperation among companies in research and development. We look into the effects of such cooperation on the innovativeness of industries, as well as on the market for the final product. In particular, we assess the size of product supply and market prices in order to evaluate companies’ profits, consumer benefits and social welfare. We take into account various legal arrangements regarding patent protection. The key hypothesis that we test in our project states that the cooperation of companies in research and development encourages them to form a cartel in the product market.
Moreover, we investigate the influence of ‘good’ and ‘bad’ patents on the innovativeness of firms. Our research methods rely on game theory – a highly regarded scientific field that has been acknowledged several times by Nobel Prizes in Economics. An important element of our research is process innovation, which allows companies to reduce the costs of production. The costs of research and development in many industries have exceeded the financial capabilities of individual enterprises for a long time.
Even the largest companies may not be able to develop and implement new technologies on their own. This is one of the reasons why firms undertake various forms of cooperation in this area. However, the question arises as to whether cooperation among companies in research and development does not lead to a reduction of competition in the product market and, in particular, to the formation of a cartel. Our project contributes to existing knowledge by considering the various types of competitive behaviour of firms on the product market. The assessment of the innovative activities of firms, combined with different styles of their behaviour in the product market, plays a key role in providing better understanding of the competition and the cartelisation processes in many industries.