We characterise the interplay between firms' decision in product development undertaken through a research joing venture (RJV), and the nature of their ensuing market behaviour. Participant firms in an RJV face a trade-off between saving the costs of product innovation by developing similar products to one another, e.g. by sharing most of the basic components of their products, and investing higher initial efforts in product innovation in order to develop more distinct products. We prove that the more the fims' products are distinct and thus less substitutable, the easier their collusion is to sustain in the marketing supergame, either in prices (Bertrand) or in quantities (Cournot). This gives rise to a non-monotone and discontinuous relationship between fims' product portfolio and their intertemporal preferences.
Lambertini, L., Poddar, S., & Sasaki, D. (2003). RJVs in product innovation and cartel stability. Review of Economic Design, 7(4), 465-477. doi: 10.1007/s100580300089
This is a working version of an article accepted for publication in Review of Economic Design, volume 7, issue 4, in 2003 following peer review. This article may not exactly replicate the final published version. The final publication is available at Springer via DOI: 10.1007/s100580300089.