Dynamic efficiency of Cournot and Bertrand competition with cooperative R&D

We consider the efficiency of Cournot and Bertrand competition when firms cooperatively conduct cost-reducing R&D.We decompose the combinedprofits externality into three components: a strategic component, a size component, and a spillover component. The latter bears an opposite sign across competition types. Hence, under Bertrand competition the minimum spillover above which cooperative R&D exceeds noncooperative R&D is higher than under Cournot competition. Also, the traditional difference in R&D investment incentives between Cournot and Bertrand competition is exemplified if firms conduct R&D cooperatively. The Cournot-Nash price can then be below the Bertrand-Nash price, especially if spillovers are strong.