Effects of Law-Enforcement Efficiency and Duration of Trials in an Oligopolistic Competition Among Fair and Unfair Firms

Building on differential game theory involving asymmetric agents, an oligopoly game between two distinct groups of firms is analyzed and solved under open-loop information. One group develops Research & Development to reduce its marginal production costs and behaves fairly, whereas the other one violates intellectual property rights of the rival, using the stolen technology to reduce its own marginal costs. We investigate the effects of law enforcement in this setup, by discussing the appropriate fine to be determined and the profitability of unfair behavior. Finally, we assess how the duration of related trials can affect efficiency of enforcement policy.