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Beat 'Em or Join 'Em: Export Subsidies versus International Research Joint Ventures in Oligopolistic Markets

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Author Info
J.P Neary
P O'Sullivan

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Abstract

This paper compares adversarial with cooperative industrial and trade policies in a dynamic oligopoly game in which a home and foreign firm compete in R&D and output and, because of spillovers, each firm benefits from the other's R&D. When the government can commit to an export subsidy, such a policy raises welfare relative to cooperation, except when R&D is highly effective and spillovers are near-complete. Without commitment, however, subsidisation may yield welfare levels much lower than cooperation and lower even than free trade, though qualifications to the dangers from no commitment are noted.

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number 0408.

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Date of creation: Nov 1998
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Handle: RePEc:cep:cepdps:0408

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Gene M. Grossman & Giovanni Maggi, 1997. "Free Trade vs. Strategic Trade: A Peek into Pandora's Box," NBER Working Papers 6211, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February. [Downloadable!] (restricted)
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  3. Leahy, Dermot & Neary, J Peter, 1998. "Strategic Trade and Industrial Policy Towards Dynamic Oligopolies," CEPR Discussion Papers 1968, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  4. Leahy, Dermot & Neary, J Peter, 1996. "International R&D Rivalry and Industrial Strategy without Government Commitment," Review of International Economics, Blackwell Publishing, vol. 4(3), pages 322-38, October.
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  5. Zvi Griliches, 1992. "The Search for R&D Spillovers," NBER Working Papers 3768, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Seade, Jesus, 1980. "The stability of cournot revisited," Journal of Economic Theory, Elsevier, vol. 23(1), pages 15-27, August. [Downloadable!] (restricted)
  7. Muniagurria, Maria E & Singh, Nirvikar, 1997. "Foreign Technology, Spillovers, and R&D Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 405-30, May.
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  8. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-306, December. [Downloadable!] (restricted)
  9. Goldberg, Pinelopi Koujianou, 1995. "Strategic Export Promotion in the Absence of Government Precommitment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(2), pages 407-26, May. [Downloadable!] (restricted)
  10. Spencer, Barbara J & Brander, James A, 1983. "International R & D Rivalry and Industrial Strategy," Review of Economic Studies, Blackwell Publishing, vol. 50(4), pages 707-22, October. [Downloadable!] (restricted)
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  11. Karp, Larry S. & Perloff, Jeffrey M., 1995. "The failure of strategic industrial policies due to manipulation by firms," International Review of Economics & Finance, Elsevier, vol. 4(1), pages 1-16. [Downloadable!] (restricted)
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  13. Neary, J. Peter, 1994. "Cost asymmetries in international subsidy games: Should governments help winners or losers?," Journal of International Economics, Elsevier, vol. 37(3-4), pages 197-218, November. [Downloadable!] (restricted)
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  14. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March. [Downloadable!] (restricted)
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  15. Motta, Massimo, 1996. "Research joint ventures in an international economy," Ricerche Economiche, Elsevier, vol. 50(3), pages 293-315, September. [Downloadable!] (restricted)
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  16. J.P Neary & D Leahy, 1995. "Learning by Doing," CEP Discussion Papers 0251, Centre for Economic Performance, LSE.
  17. Eaton, Jonathan & Grossman, Gene M, 1986. "Optimal Trade and Industrial Policy under Oligopoly," The Quarterly Journal of Economics, MIT Press, vol. 101(2), pages 383-406, May. [Downloadable!] (restricted)
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  18. Maskin, Eric S & Newbery, David M, 1990. "Disadvantageous Oil Tariffs and Dynamic Consistency," American Economic Review, American Economic Association, vol. 80(1), pages 143-56, March.
  19. Leahy, Dermot & Neary, J Peter, 1997. "Public Policy towards R&D in Oligopolistic Industries," American Economic Review, American Economic Association, vol. 87(4), pages 642-62, September. [Downloadable!] (restricted)
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  20. James A. Brander & Barbara J. Spencer, 1983. "Strategic Commitment with R&D: The Symmetric Case," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 225-235, Spring. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gerda Dewit & Dermot Leahy, 2001. "Rivalry In Uncertain Export Markets: Commitment Versus Flexibility," Economics, Finance and Accounting Department Working Paper Series n1050201, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth. [Downloadable!]
    Other versions:
  2. J.P Neary & D Leahy, 1998. "Strategic Trade and Industrial PolicyTowards Dynamic Oligopolies," CEP Discussion Papers 0409, Centre for Economic Performance, LSE. [Downloadable!]
    Other versions:
  3. Leahy, Dermot & Naghavi, Alireza, 2006. "Intellectual Property Rights and Entry into a Foreign Market: FDI vs Joint Ventures," CEPR Discussion Papers 5672, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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