Luca Lambertini, Sougata Poddar, and Dan Sasaki

"Research joint ventures, product differentiation, and price collusion"

JEL codes: D43, L13, O31
Keywords: R&D, product innovation, collusive sustainability, time discount factor, optimal punishment

Abstract: We investigate the interplay between firms' decisions in product development, either joint or independent, and their ensuing repeated pricing, either collusive or Bertrand-Nash. A joint venture develops a single product, whereas independent ventures develop their respective products which can be differentiated. We prove that joint product development and the resulting lack of horizontal product differentiation may destabilise collusion, whilst firms' R&D decisions have no bearings on collusive sustainability if differentiation is vertical. We also discover the non-monotone dependence of firms' venture decisions at the development stage upon their time preferences, as well as upon consumers' willingness to pay.