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R&D Subsidies, Spillovers and Privatization in Mixed Markets

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  • Maria José Gil Moltó

    ()

  • Joanna Poyago.Theotoky
  • Vasileios Zikos

Abstract

We examine the use of subsidies to R&D in a mixed and a private duopoly market. We show that the socially optimal R&D subsidy is increasing in the degree of spillovers but it is lower in the private duopoly. The optimal R&D subsidy leads to an increase in total R&D and production, however, it does not lead to the equalisation of per firm output and therefore to an efficient distribution of production costs. We also find that privatization of the public firm reduces R&D activity and welfare in the duopoly market. This result stands even when optimal R&D subsidies are provided.

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Bibliographic Info

Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 10/19.

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Date of creation: Jul 2010
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Handle: RePEc:lec:leecon:10/19

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Keywords: mixed duopoly; process innovation; R&D subsidies; privatization; spillovers.;

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References

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  1. Poyago-Theotoky, Joanna, 1998. "R&D Competition in a Mixed Duopoly under Uncertainty and Easy Imitation," Journal of Comparative Economics, Elsevier, vol. 26(3), pages 415-428, September.
  2. de Fraja, Giovanni & Delbono, Flavio, 1990. " Game Theoretic Models of Mixed Oligopoly," Journal of Economic Surveys, Wiley Blackwell, vol. 4(1), pages 1-17.
  3. Joanna Poyago-Theotoky, 2001. "Mixed oligopoly, subsidization and the order of firms' moves: an irrelevance result," Economics Bulletin, AccessEcon, vol. 12(3), pages 1-5.
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Cited by:
  1. Saha, Souresh, 2014. "Firm's objective function and product and process R&D," Economic Modelling, Elsevier, vol. 36(C), pages 484-494.
  2. Kesavayuth, Dusanee & Zikos, Vasileios, 2013. "R&D versus output subsidies in mixed markets," Economics Letters, Elsevier, vol. 118(2), pages 293-296.
  3. Matsumura, Toshihiro & Okumura, Yasunori, 2013. "Privatization neutrality theorem revisited," Economics Letters, Elsevier, vol. 118(2), pages 324-326.
  4. Matsumura, Toshihiro & Sunada, Takeaki, 2013. "Advertising competition in a mixed oligopoly," Economics Letters, Elsevier, vol. 119(2), pages 183-185.

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