Ruhr Economic Papers

Ruhr Economic Papers #785

Does Sequential Decision-Making Trigger Collective Investment in Automobile R&D? Experimental evidence

by Tobias Buchmann, Alexander Haering, Muhamed Kudic and Michael Rothgang

RWI, 12/2018, 30 S./p., 8 Euro, ISBN ISBN 978-3-86788- DOI: 10.4419/86788913

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Abstract

We conduct a framed laboratory experiment to gain in-depth insights on factors that
drive collective research and development efforts among firms located along the
automotive value chain. In particular, we employ a public goods experiment and
analyze the influence of sequential decision-making on the willingness to engage
in cooperation and on economic welfare. By using a linear value chain setting with
three suppliers and one OEM, we analyze vertical R&D cooperation. Our results reveal
that contributions increase in situations with sequential decision-making and that
sequential decisions increase the overall welfare, even in case of unequally distributed
R&D budgets.

JEL-Classification: C92, D79, O31

Keywords: Public goods experiment; collective innovation; automobile industry; value chain; innovation barriers; sequential decision making

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