Bruno Versaevel

This paper investigates the combined impact of a first-mover advantage and of firms' limited mobility on the equilibrium outcomes of a continuous-time model adapted from by Boyer, Lasserre, and Moreaux (2007). Two firms face market development uncertainty and may enter by investing in lumpy capacity units. With perfect mobility, when the first entrant plays as a Stackelberg leader, in equilibrium it invests earlier, and the follower later, than in the Cournot benchmark scenario. There is rent equalization, and the two firms' equilibrium value is lower. This result is not robust to the introduction of firm-specific limited mobility constraints. If one firm is sufficiently less able than its rival to mobilize resources at early stages of the market development process, there is less rent dissipation,and no equalization, in a constrained preemption equilibrium. The first-mover advantage on the product market then results in more value for the less constrained firm, and in less value for the follower than when they play in the Cournot manner with perfect mobility. The leading firm maximizes value by entering immediately before its constrained rival, though later than made possible by its superior mobility. Greater uncertainty reduces the value differential to the benefit of the follower. It also increases the distance between the firms' respective investment triggers. The specifications and results are discussed in light of recent developments in the market for music downloads.

Patent pools are cooperative agreements between several patent owners to bundle the sale of their respective licenses. In this paper we analyze their consequences on the speed of the innovation process. We adopt an ex ante perspective and study the impact of possible pool formation on the incentives to innovate. Because participation in the creation of a pool acts as a bonus reward on R&D activity, we show that a firm's investment pattern is upward sloping over time before pool formation. The smaller the set of initial contributors, the higher this effect. The ex ante perspective leads to policy implications. It reveals that patent pools encourage high R&D efforts, in comparison to a joint profit-maximizing benchmark, by early innovators. Patent pools can thus be used as a stimulating instrument for the generation of the first patents when innovation is sequential in nature. We also find that, when solicited by firms in advance of the pool foundation, a forward-looking regulator has an incentive to delay the clearance date. This can result in a suboptimal pool size, as compared with the social welfare optimum. This questions the relevance of a review process by competition authorities before a pool forms.

This paper constructs a model of R&D delegation, in which several firms may outsource new technology from the same for-profit laboratory. When R&D costs are uncertain at the contracting stage, necessary and sufficient conditions are provided that characterize Nash equilibria in the laboratory's outputs and the firms' non-negative transfer payments. A subset of these equilibria is identified in which firms' payments truthfully reflect their valuation of all possible alternatives vis-´a-vis the expected net profits. These truthful Nash equilibria implement the first-best outcome when the support of the stochastic parameter is not too large, in which case firms' net payoffs do not depend on the stochastic component and are undominated. When externalities impact the nature of competition among firms, both on the intermediate market for R&D services and the final market for goods, sufficient conditions are given for the laboratory to earn positive benefits or not, and for firms to choose either to cooperate horizontally or to acquire the laboratory. The latter two options are shown not to impact the R&D outputs supplied by the laboratory, nor the joint profits earnt by firms. A first policy implication is that no new regulatory tool is needed for aligning firms' interests with a social welfare objective. The results also support legal environments which do not prevent firms to include discriminatory clauses in their R&D contracts on the intermediate market for new knowledge, including in highly concentrated industries. This laissez faire message does not extend to final-market antitrust considerations.

- Vencatachellum, D., and B., Versaevel, 2004, "R&D Delegation in a Bertrand Duopoly with Spillovers".

We investigate the distribution of profits between a laboratory and two firms on the intermediate market for cost-reducing or/and demand-enhancing technology, and infer implications for the governance of R&D. The laboratory supplies tailor-made multi-dimensional R&D services at some costs, and maximizes its individual profits. Firms are interested in delegating the production of R&D services from a common laboratory, to whom they offer contingent payment offers. On the final market for goods, firms compete in prices or in quantities. We unveil mild sufficient conditions for the (non) appropriation of innovation profits by the laboratory. Anti-complementarities in the dimensions of R&D services imply that the laboratory appropriates some non-zero share of joint profits in all equilibria. In this case, we show that each firm has strategic incentives to shift to a more integrated structure by merging horizontally or by acquiring the laboratory. Complementarities in the development dimensions imply that the laboratory exactly breaks even in all equilibria. In that case, firms have no incentive to shift to a more integrated governance structure. A series of specific algebraic forms, as borrowed from the literature, illustrate the broad applicability of the results, and uncovers common features in seemingly unrelated representations of postinnovation cost and demand conditions.