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Optimal technology policy: subsidies versus monitoring

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  • M. Pilar Socorro

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    Abstract

    We analyze the optimal technology policy to solve a free-riding problem between the members of a RJV. We assume that when intervening the Government suffers an additional adverse selection problem because it is not able to distinguish the value of the potential innovation. Although subsidies and monitoring may be equivalent policy tools to solve firms' free-riding problem, they imply different social losses if the Government is not able to perfectly distinguish the value of the potential innovation. The supremacy of monitoring tools over subsidies is proved to depend on which type of information the Government is able to obtain about firms' R&D performance.

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    Bibliographic Info

    Paper provided by Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) in its series UFAE and IAE Working Papers with number 570.03.

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    Length: 31
    Date of creation: 02 May 2003
    Date of revision:
    Handle: RePEc:aub:autbar:570.03

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    Keywords: RJV; moral hazard; adverse selection; subsidies; monitoring;

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