Size of RJVs with partial cooperation in product development

In this paper, we consider Research Joint Ventures (RJVs) that are set up to develop product components. We propose an n-firm oligopoly model to study the effect of the degree of cooperation in product development (i.e., the number of jointly developed product components) on the size of the RJV (i.e., the number of RJV participants). We assume that a higher degree of cooperation in product development restricts the firms' ability to differentiate their products, and hence intensifies competition among the participating firms. We find that the equilibrium size of the RJV can vary non-monotonically with the degree of cooperation. If the degree of product differentiation is not very sensitive to the degree of cooperation, then the RJV is industry-wide.