Are Partial Ownership Arrangements Advantageous ?

Abstract

Using a two-stage differentiated-product Cournot duopoly model with technological spillovers, this paper investigates the effect partial ownership arrangements (POAs) among rivals has on the market outcome when firms also compete in a non-production activity, R&qmp;D. Although POAs are found to be associated with lower profits, when the degree of product differentiation is small and technological spillovers are relatively large, they are found to result in higher R&qmp;D, output and social welfare levels.

JEL Classification: D43, L13, L15