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Strategic R&D Policy in a Quality-Differentiated Industry with More than Two Exporting Countries

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  • Naoto Jinji
  • Tsuyoshi Toshimitsu

Abstract

In this paper, we examine strategic R&D policy for quality-differentiated products in a thirdmarket trade model. We extend the previous work by adding a third exporting country, so that the market structure is international triopoly. We show that the presence of the third exporting country affects strategic R&D policies. With three exporting countries, the lowest-quality exporting country gains from taxing domestic R&D and the middle-quality exporting country gains from subsidizing domestic R&D under both Bertrand and Cournot competition. As in the duopoly case, however, the unilaterally optimal policy for the highest-quality exporting country depends on the mode of competition. Various cases of policy coordination by exporting countries are also examined.

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Bibliographic Info

Paper provided by Graduate School of Economics Project Center, Kyoto University in its series Discussion papers with number e-09-001.

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Length: 33 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:kue:dpaper:e-09-001

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Related research

Keywords: strategic trade policy; R&D subsidy/tax; vertical differentiation; oligopoly;

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References

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  1. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  2. Lutz, Stefan, 1996. "Trade Effects of Minimum Quality Standards with and without Deterred Entry," CEPR Discussion Papers 1384, C.E.P.R. Discussion Papers.
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  8. Scarpa, Carlo, 1998. "Minimum quality standards with more than two firms1," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 665-676, September.
  9. 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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  18. Toshimitsu, Tsuyoshi, 2003. "Optimal R&D policy and endogenous quality choice," International Journal of Industrial Organization, Elsevier, vol. 21(8), pages 1159-1178, October.
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  23. David Hummels & Peter J. Klenow, 2005. "The Variety and Quality of a Nation's Exports," American Economic Review, American Economic Association, vol. 95(3), pages 704-723, June.
  24. Naoto Jinji, 2003. "Strategic policy for product R&D with symmetric costs," Canadian Journal of Economics, Canadian Economics Association, vol. 36(4), pages 993-1006, November.
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