International R&D Rivalry and Industrial Strategy
AbstractThis paper presents a theory of government intervention which provides an explanation for "industrial strategy" policies such as R&D or export subsidies in imperfectly competitive international markets. Each producing country has an incentive to try to capture a greater share of rent-earning industries using subsidies, but the subsidy-ridden international equilibrium is jointly suboptimal. The equilibrium in the strategic game involving firms and governments is modelled as a three stage subgame perfect Nash equilibrium. The assumption that the government is the first player in this game allows it to influence equilibrium industry outcomes by altering the set of credible actions open to firms.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1192.
Date of creation: Aug 1983
Date of revision:
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Other versions of this item:
- 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.
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- Frenkel, Jacob A, 1971. "On Domestic Demand and Ability to Export," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 668-72, May-June.
- Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-89, March.
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414, Queen's University, Department of Economics.
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- Dixit, Avinash, 1979.
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The Warwick Economics Research Paper Series (TWERPS)
140, University of Warwick, Department of Economics.
- Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
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