Competition vs. collaboration: a four set game theory - innovation, collaboration, imitation, and 'do nothing'

Opinions on when competition or collaboration is optimal differ, particularly in the case of product innovation. To examine the broad determinants of both collaboration and innovation patterns, the present study takes a game theoretic approach and develops a four-strategy set (innovation, collaboration, imitation and 'do nothing') to understand when competition or collaboration is optimal. The model explores the collaboration determinants in depth, focusing on the sharing of collaboration costs. By designing and using the MATLAB animation software, the study generates the equilibrium solution for each strategy set. Based on the game theoretic approach, ten predictions are generated about: a) the probability of collaboration; b) the collaboration costs; c) the effect of technology on price and revenue. The study concludes with policy implications at both firm and national levels under conditions of weak intellectual property rights (IPR) such as in China based on the game theoretic approach.