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Public Policy towards R&D in a Mixed Duopoly with Spillovers

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Author Info
María José Gil-Moltó () (Dept of Economics, Loughborough University)
Joanna Poyago-Theotoky () (Dept of Economics, Loughborough University)
Vasileios Zikos () (Dept of Economics, Loughborough University)

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Abstract

We investigate the use of subsidies to R&D, both in a mixed and a private duopoly market. We show that the socially optimal R&D subsidy is positive and increasing in the degree of spillovers both in the private and the mixed duopoly, although it is lower for the former than for the latter. We also find support for the empirical claim that privatization is followed by a scaling down of the R&D activity. A comparative static analysis of welfare levels suggests that privatization is welfare detrimental, which lends some support to the views against the widespread adoption of privatization programs.

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File URL: http://www.lboro.ac.uk/departments/ec/RePEc/lbo/lbowps/privatization_R&D.pdf
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Publisher Info
Paper provided by Department of Economics, Loughborough University in its series Discussion Paper Series with number 2006_17.

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Date of creation: Jul 2006
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Handle: RePEc:lbo:lbowps:2006_17

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Related research
Keywords: mixed duopoly; process innovation; R&D subsidies; privatisation; spillovers.;

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Find related papers by JEL classification:
L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs
L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises
O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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  1. Vasileios Zikos, 2007. "Equilibrium and Optimal R&D Roles in a Mixed Market," Discussion Paper Series 2007_08, Department of Economics, Loughborough University, revised Mar 2007. [Downloadable!]
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  2. Vasileios Zikos, 2007. "A Reappraisal of the Irrelevance result in mixed duopoly: A note on R&D competition," Economics Bulletin, Economics Bulletin, vol. 12(8), pages 1-6. [Downloadable!]
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