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Fabio Di Dio and Luca Correani
''Collaboration Networks in a Hotelling Game''
( 2019, Vol. 39 No.1 )
The paper investigates the stability and efficiency of R&D collaboration in a three-firm Hotelling game. Firms are assumed to be horizontally and vertically differentiated and to provide public services where price is thus set by the regulator. We show that firm-quality effort decreases with the number of links. Nonetheless, a conflict between stability and efficiency is likely to occur. We show that the complete network is uniquely stable but efficient only for a sufficiently low level of spillover rate. As a result, an over-connection problem may arise. However, for high spillover rates, the welfare-superior networks tend to be denser provided that the horizontal differentiation is low.
Keywords: Networks; Hotelling; Product Differentiation
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
Manuscript Received : Jul 11 2018 Manuscript Accepted : Jan 13 2019

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