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Public policy towards R&D in oligopolistic industries

Author

Listed:
  • Dermot Leahy
  • J. Peter Neary

Abstract

This paper examines the free-market and socially-optimal outcomes in a dynamic oligopoly model with R&D spillovers. First-best optimal subsidies to R&D are higher when firms play strategically against each other, but lower when they cooperate on R&D (at least with high spillovers) and when they play strategically against the government. Second-best optimal subsidies to R&D are presumptively higher than first-best ones, but policies to encourage cooperation are likely to be redundant (since it is always privately profitable) and simulations suggest that the welfare cost of lax competition policy is high.

Suggested Citation

  • Dermot Leahy & J. Peter Neary, 1995. "Public policy towards R&D in oligopolistic industries," Working Papers 199511, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:199511
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    File URL: http://hdl.handle.net/10197/1779
    File Function: First version, 1995
    Download Restriction: no
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    Keywords

    Research & Development; R&D spillovers; R&D cooperation; Research joint ventures; Subgame perfect equilibrium; Strategic aspects of public policy; Research; Industrial; Commercial policy; Research; Industrial--Government policy; Oligopolies;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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