ABSTRACT
From the time of Adam Smith to the present, a common belief persists, according to which collusion on prices and quantities among rival firms is detrimental to social welfare in competitive market economies. This being the case, it seems rather peculiar that economists and policy-makers alike are now becoming quite enthusiastic about collaborative R&D through which otherwise competing firms collude on R&D activities and share their costs and benefits. It seems to us that there are at least two reasons behind this recent upsurge of enthusiasm.
