International trade policy towards monopolies and oligopolies
AbstractThis paper highlights the importance of product differentiation and endogenous R&D in determining the optimal R&D policy, in a model where investment in cost-reducing R&D is committed before firms compete in a differentiated-goods third-country export market. R&D is always taxed in oligopolies for high degrees of product differentiation. For lower degrees of product differentiation the duopoly is subsidized or the government remains inactive. In contrast, the monopoly is always subsidized.The government with a duopoly may be active or inactive depending on the degree of product differentiation.Thus,wemay observe a reversal in the sign of the optimal R&D policy if the degree of product differentiation changes or, alternatively, if there is a change in the number of firms. Similar qualitative results hold if trade policy uses output subsidies, instead of R&D promotion.
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Bibliographic InfoPaper provided by Universidad Carlos III de Madrid in its series Open Access publications from Universidad Carlos III de Madrid with number info:hdl:10016/14983.
Length: 477 p.
Date of creation: Aug 2009
Date of revision:
Publication status: Published in Review of international economics (2009-08) v. 17, p.461-475
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Web page: http://www.uc3m.es
Product differentiation; strategic trade policy; policy reversals; R&D subsidies; monopoly; duopoly;
Other versions of this item:
- Praveen Kujal & Juan Ruiz, 2003. "International Trade Policy towards Monopolies and Oligopolies," International Trade 0302002, EconWPA, revised 17 Mar 2003.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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