The accumulation of knowledge with intra-industry knowledge spillovers: A competition game and the Nash equilibrium based on firm cost minimisation

Abstract

This paper examines a competition game whose key variables are the R&D efforts (e.g. R&D expenditures) and accumulated knowledge of firms located in a specific region. The most significant element of accumulated knowledge is knowledge spillovers. These are considered intra-industry as it is assumed that the firms operate within the same industry (i.e. similar types of firms) and competitors offer similar products. The present study identifies a Nash equilibrium based on firm cost minimisation. This is derived under the assumption that the firms under examination act rationally and are primarily concerned with achieving optimal outcomes - specifically, by minimising their total costs.