of knowledge. It turns out that the incentive to form an R&D cartel is actually maximal in the case of zero spillovers. Since the scope of the prisoner’s dilemma increases as the spillovers go down, one can argue that R&D cartels are motivated on the part of the firms involved by the search for a way out of the prisoner’s dilemma grip, whenever spillover effects are relatively small. When the latter are large, the commonly held view that they can motivate firms to form R&D cartels (forcefully put forth by AJ and others) is implicitly confirmed here.
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