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This paper analyzes the stability and the welfare properties of R&D cooperations in an oligopolistic market with n firms. It is shown that the sizes of stable coalitions vary significantly with the kind and the actual value of spillovers, the institutional arrangement of cooperation between the firms and the underlying stability concept. Moreover, the welfare maximizing coalition is rarely a stable equilibrium outcome, hence there is scope for political intervention. However, the informational requirements on part of the policy makers are high, and they are at risk to adopt inappropriate measures that are detrimental to social welfare.

This paper analyzes the stability and the welfare properties of R&D cooperations in an oligopolistic market with n firms. It is shown that the sizes of stable coalitions vary significantly with the kind and the actual value of spillovers, the institutional arrangement of cooperation between the firms and the underlying stability concept. Moreover, the welfare maximizing coalition is rarely a stable equilibrium outcome, hence there is scope for political intervention. However, the informational requirements on part of the policy makers are high, and they are at risk to adopt inappropriate measures that are detrimental to social welfare.

An abstract game satisfies Dominance Invariance if the indirect and the direct dominance relations, or myopic and farsighted dominance, are equivalent. Mauleon et al. (Int J Game Theory 43(4):925–943, 2014) study Dominance Invariance as an attractive condition that eliminates the differences between a farsighted solution concept and its myopic counterpart. We show that Dominance Invariance can also be used to eliminate the differences between various farsighted solution concepts in any abstract game. Together with an additional condition called No Infinite Chains, Dominance Invariance implies the existence and uniqueness of the farsighted stable set, its equivalence to the largest consistent set and its equivalence to the (strong) rational expectations farsighted stable set when the latter exists. This also implies that both the farsighted stable set and the largest consistent set do not suffer from the problem of maximality under these conditions.