This paper examines possible consequences of subsidies to R&D and to volume production proposed under the Clinton administration's flat panel display initiative. We do this in the context of a model in which firms behave competitively in the short run, while realizing that their choices of capacity and yield-improving R&D in the medium and long run will affect market price. Policy simulations show that steady state yields and profits are lower, while prices are higher with subsidies for capacity acquisition than with R&D subsidies. This occurs because a firm's incentives to do R&D are diminished by a subsidy on capacity costs.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
5415.
Length: Date of creation: Jan 1996 Date of revision: Publication status: published relationship to a non-chapter. This should not happen. Please contact NBER. Handle: RePEc:nbr:nberwo:5415
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Krishna, K & Thursby, M, 1995.
"Whither Flat Panel Displays?,"
Papers
95-007, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
Chapter
Kala Krishna & Marie Thursby, 1997.
"Whither Flat Panel Displays?,"
NBER Chapters,
in: The Effects of U.S. Trade Protection and Promotion Policies, pages 247-271
National Bureau of Economic Research, Inc.
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