R&D Alliances in Horizontally Differentiated Oligopoly

The paper extends the analysis of R&D network in a setting when horizontally differentiated oligopoly is considered. Our intention is to analysis the interaction between firms´ incentives to invest in R&D and the structure of collaboration networks in different intensities of market competition. In the case of stronger market competition, firms´ R&D efforts are decreasing in the level of collaboration links, and the level of cost reduction is initially increasing and then decreasing. By contrast, under weak market competition, individual R&D effort, the level of cost reduction, profits and social welfare are all increasing in the level of collaboration links.