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Optimal Product R&D Policies with Endogenous Quality Choices and Unilateral Spillover

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  • Taba Yumiko

    (Faculty of Education and Integrated Arts and Sciences, Waseda University, Nishi-Waseda 1-6-1, Shinjuku-ku, Tokyo 196-8050, Japan)

Abstract

This study derives non-cooperative and cooperative optimal product research and development (R&D) policies of a country with a high-quality firm and a country with a low-quality firm in the presence of technology spillover under Cournot and Bertrand competitions in an international duopoly. When the respective governments determine their R&D policies non-cooperatively, optimal policies for both countries involve an R&D tax (subsidy) if spillover is large (small). When the governments choose their R&D policies cooperatively, a tax is always optimal for the country with low-quality firm and a subsidy (tax) is optimal for the country with high-quality firm if spillover is large (small). In addition, we show that the non-cooperative optimal product R&D Policy is tax for a wider range of spillover effects under Cournot competition, compared to the case of Bertrand competition.

Suggested Citation

  • Taba Yumiko, 2016. "Optimal Product R&D Policies with Endogenous Quality Choices and Unilateral Spillover," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 16(1), pages 365-391, January.
    • Handle: RePEc:bpj:bejeap:v:16:y:2016:i:1:p:365-391:n:16
    DOI: 10.1515/bejeap-2015-0090
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    References listed on IDEAS

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    1. Zhou, Dongsheng & Spencer, Barbara J. & Vertinsky, Ilan, 2002. "Strategic trade policy with endogenous choice of quality and asymmetric costs," Journal of International Economics, Elsevier, vol. 56(1), pages 205-232, January.
    2. Tsuyoshi Toshimitsu, 2014. "Strategic Product R&D Investment Policy under International Rivalry in the Presence of Demand Spillover Effects," International Economic Journal, Taylor & Francis Journals, vol. 28(2), pages 293-309, June.
    3. Naoto Jinji & Tsuyoshi Toshimitsu, 2006. "Optimal Policy For Product R&D With Endogenous Quality Ordering: Asymmetric Duopoly," Australian Economic Papers, Wiley Blackwell, vol. 45(2), pages 127-140, June.
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    5. Tsuyoshi Toshimitsu & Naoto Jinji, 2008. "A Note on Strategic Trade Policy and Endogenous Quality Choice," Review of International Economics, Wiley Blackwell, vol. 16(1), pages 173-185, February.
    6. Pascal L. Ghazalian, 2012. "Assessing the Effects of International Trade on Private R&D Expenditures in the Food Processing Sector," Industry and Innovation, Taylor & Francis Journals, vol. 19(4), pages 349-369, May.
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    Cited by:

    1. Thomas H. W. Ziesemer, 2022. "Foreign R&D spillovers to the USA and strategic reactions," Applied Economics, Taylor & Francis Journals, vol. 54(37), pages 4274-4291, August.
    2. Yoonho Choi & E. Kwan Choi, 2021. "Selling High-Tech Inputs to the Enemy," CESifo Working Paper Series 8886, CESifo.
    3. Choi, Yoonho & Kwan Choi, E., 2018. "Quality competition in north-south trade," International Journal of Production Economics, Elsevier, vol. 201(C), pages 216-224.
    4. Choi, Yoonho & Choi, E. Kwan, 2021. "Selling high-tech inputs to the enemy," International Journal of Production Economics, Elsevier, vol. 234(C).

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