Endogenous R&D symmetry in linear duopoly with one-way spillovers

In a linear model of cost reducing R&D/Cournot competition, firm assymetry is shown to be sustainable as subgame perfect Nash equilibrium with R&D competition only if the productivity of research is sufficiently large realtive to the benefits from imitation. In such a case, industry-wide cost reduction and firms assymetry are increasing and decreasing functions of the spillover rate, respectively. In the absence of spillovers, a symmetric joint lab generates higher consumer surplus and social welfare than a pari of assymmetric competitors. If spillovers are not too small, asymmetric R&D competition is advantageous to consumers, but not to firmsEndogenous asymmetry, Cournot instability, R&D cooperation