Abstract: For a two-tier market structure included of one downstream monopolist and some upstream oligopolists,an income and two cost allocation mechanisms are put forward for a R&D cooperation mode in which upstream and downstream firms invest and the downstream monopolist carries on a R&D project.In income allocation mechanisms,we get the solutions of output,price and income by backward induction.In cost allocation mechanisms,the limitation of R&D capital, the size of alliance and the cost allocation coefficient are researched.Some inclusions are acquired,such as the optimal size of a R&D alliance only includes of an upstream firm.Last,proportional cost allocation and fixed fraction cost allocation are compared.

Key words: game theory, vertical cooperation, R&D cooperation, income allocation, cost allocation