Cooperative and noncooperative R&D in experimental duopoly markets

We analyze the relation between technological spillovers and R&D cooperation in a duopoly experiment based on the well-known model of d’Aspremont and Jacquemin. For scenarios without and with full spillovers, two noncooperative treatments are run, one without and one with non-binding communication possibilities, and one cooperative treatment, with binding contract possibilities. We find that without technological spillovers, binding R&D contracts are needed for R&D decisions to deviate from the subgame perfect Nash R&D level towards the cooperative level. With full spillovers, the possibility of non-binding cheap-talk may suffice to move closer to R&D cooperation.