Inducing R&D investment with price ceilings
AbstractThough government intervention is prevalent in the market for research and development (R&D), most literature has focused on the use of subsidies, patents or joint research ventures to obtain the efficient R&D investment. By using a two-stage duopoly model in which firms first choose the level of investment and then output, our paper shows that the introduction of a price ceiling by the regulator will result in the optimal level of R&D. This interesting but counterintuitive result contrasts with the existing literature and advances our understanding about price ceilings.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 30 (2010)
Issue (Month): 2 ()
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Research and development; Subsidy; Price ceiling;
Find related papers by JEL classification:
- D2 - Microeconomics - - Production and Organizations
- D4 - Microeconomics - - Market Structure and Pricing
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- Darmot Leahy & J. Peter Neary, 1997. "Public Policy Towards R & D in Oligopolistic Industry," Politická ekonomie, University of Economics, Prague, vol. 1997(5), pages 683-698.
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