The accumulation of knowledge with intra-industry knowledge spillovers: A competition game and the Nash equilibrium based on firm cost minimisation

TL;DR

This paper models how firms within the same industry compete and accumulate knowledge through R&D efforts and knowledge spillovers, deriving a Nash equilibrium based on cost minimization.

Contribution

It introduces a game-theoretic framework analyzing intra-industry knowledge spillovers and derives a Nash equilibrium considering firms' cost minimization strategies.

Findings

Identifies a Nash equilibrium in R&D and knowledge accumulation

Highlights the role of intra-industry knowledge spillovers in competition

Provides insights into firms' cost minimization behavior

Abstract

This paper examines a competition game whose key variables are the R&D efforts (e.g. R&D expenditures) and accumulated knowledge of firms located in a specific region. The most significant element of accumulated knowledge is knowledge spillovers. These are considered intra-industry as it is assumed that the firms operate within the same industry (i.e. similar types of firms) and competitors offer similar products. The present study identifies a Nash equilibrium based on firm cost minimisation. This is derived under the assumption that the firms under examination act rationally and are primarily concerned with achieving optimal outcomes - specifically, by minimising their total costs.