Cooperative and noncooperative R&D in experimental duopoly markets

We analyze the relation between technological spillovers and R&D cooperation in a duopoly experiment based on the well-known model of d'Aspremont and Jacquemin. For scenarios without and with full spillovers, two noncooperative treatments are run, one without and one with nonbinding communication possibilities, and one cooperative treatment, with binding contract possibilities. We find that without technological spillovers, binding R&D contracts are needed for R&D decisions to deviate from the subgame perfect Nash R&D level towards the cooperative level. With full spillovers, the possibility of non-binding cheap-talk may suffice to move closer to R&D cooperation. © 2005 Elsevier B.V. All rights reserved.