Strategic product R&D investment policy under international rivalry in the presence of demand spillover effects

This paper first presents the optimal conditions for strategic R&D investment policy in the cases of noncooperative and cooperative R&D investment policies with international rivalry. Then we deal with a model of strategic product (i.e., quality-improving) R&D investment competition. In particular, we analyze an optimal R&D investment policy with regard to the two cases in the presence of demand spillover effects associated with improving the quality of a product. We show how optimality depends on the strength of demand spillover effects. We also consider the same problems assuming heterogeneous consumers and alternative utility functions.