R&D cooperation and growth

If R&D produces nonrival inputs then firms have an incentive to cooperate, but free riding can make cooperation difficult. This paper builds a simple endogenous growth model allowing cooperative behavior among firms in their R&D game. growth Industry's first best cooperative investment is enforceable as an equilibrium only if technology is above a threshold level. This model allows for switching equilibria able to sustain slower growth in poorer countries. The model also admits sunspot equilibria. In a world where the production of ideas is important multiplicity and variability of economic performance can be relevant. (C) 1999 Academic Press.