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Beat 'em or join 'em: export subsidies versus international research joint ventures in oligopolistic markets

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  • J. Peter Neary
  • Paul O'Sullivan

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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File URL: http://eprints.lse.ac.uk/20247/
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Bibliographic Info

Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 20247.

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Length: 32 pages
Date of creation: Nov 1998
Date of revision:
Handle: RePEc:ehl:lserod:20247

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  1. Spencer, Barbara J & Brander, James A, 1983. "International R & D Rivalry and Industrial Strategy," Review of Economic Studies, Wiley Blackwell, vol. 50(4), pages 707-22, October.
  2. Leahy, Dermot & Neary, J Peter, 1999. "R&D Spillovers and the Case for Industrial Policy in an Open Economy," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 40-59, January.
  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.
  4. D Leahy & J.P. Neary, 1995. "Public Policy Towards R&D in Oligopolistic Industries," CEP Discussion Papers dp0270, Centre for Economic Performance, LSE.
  5. Barbara J. Spencer & James A. Brander, 1982. "Strategic Commitment with R&D: The Symmetric Case," Working Papers 516, Queen's University, Department of Economics.
  6. 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.
  7. Leahy, Dermot & Neary, J Peter, 1999. "Learning by Doing, Precommitment and Infant-Industry Promotion," Review of Economic Studies, Wiley Blackwell, vol. 66(2), pages 447-74, April.
  8. 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.
  9. 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.
  10. Seade, Jesus, 1980. "The stability of cournot revisited," Journal of Economic Theory, Elsevier, vol. 23(1), pages 15-27, August.
  11. Leahy, Dermot & Neary, J Peter, 1996. "International R&D Rivalry and Industrial Strategy without Government Commitment," Review of International Economics, Wiley Blackwell, vol. 4(3), pages 322-38, October.
  12. Neary, J Peter, 1991. "Cost Asymmetries in International Subsidy Games: Should Governments Help Winners or Losers?," CEPR Discussion Papers 560, C.E.P.R. Discussion Papers.
  13. 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.
  14. A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
  15. 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.
  16. 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.
  17. Dixit, Avinash, 1979. "The Role of Investment in Entry-Deterrence," The Warwick Economics Research Paper Series (TWERPS) 140, University of Warwick, Department of Economics.
  18. Grossman, Gene & Maggi, Giovanni, 1998. "Free Trade Vs. Strategic Trade: A Peek into Pandora's Box," CEPR Discussion Papers 1784, C.E.P.R. Discussion Papers.
  19. 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.
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Citations

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Cited by:
  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.
  2. Alireza Naghavi & Dermot Leahy, 2006. "Intellectual Property Rights and Entry into a Foreign Market: FDI vs. Joint Ventures," Working Papers 2006.97, Fondazione Eni Enrico Mattei.
  3. Alireza Naghavi & Dermot Leahy, 2008. "Intellectual Property Rights and North-South Joint Ventures," Center for Economic Research (RECent) 017, University of Modena and Reggio E., Dept. of Economics.
  4. Thanh Le & Cuong Le Van, 2014. "Trade Liberalization and Optimal R&D Policies with Process Innovation," Working Papers 2014-119, Department of Research, Ipag Business School.
  5. Dewit, Gerda & Leahy, Dermot, 2001. "Rivalry in Uncertain Export Markets: Commitment versus Flexibility," CEPR Discussion Papers 2771, C.E.P.R. Discussion Papers.
  6. Paul O'Sullivan, 2013. "Less Is More? Research Joint Ventures And Entry Deterrence," Economics, Finance and Accounting Department Working Paper Series n245-13.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  7. Paul O'Sullivan, 2013. "Research Joint Ventures: A Barrier To Entry?," Economics, Finance and Accounting Department Working Paper Series n246-13.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  8. Alireza Naghavi, 2003. "Strategic Intellectual Property Protection Policy and North-South Technology Transfer," Working Papers 200313, School Of Economics, University College Dublin.

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