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R&D Subsidies versus R&D Cooperation in a Duopoly with Spillovers and Pollution

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  • Emmanuel Petrakis
  • Joanna Poyago‐Theotoky

Abstract

We introduce pollution, as a by‐product of production, into a non‐tournament model of R&D with spillovers. Technology policy takes the form of either R&D subsidisation or pre‐competitive R&D cooperation. We show that, when the emissions tax is exogenous, the optimal R&D subsidy can be negative, i.e. there should be a tax on R&D, depending on the extent of the appropriability problem and the degree of environmental damage. In a wide class of cases, depending on the parameter values, welfare in the case of R&D cooperation, is lower than welfare in the case of R&D subsidisation.

Suggested Citation

  • Emmanuel Petrakis & Joanna Poyago‐Theotoky, 2002. "R&D Subsidies versus R&D Cooperation in a Duopoly with Spillovers and Pollution," Australian Economic Papers, Wiley Blackwell, vol. 41(1), pages 37-52, March.
    • Handle: RePEc:bla:ausecp:v:41:y:2002:i:1:p:37-52
    DOI: 10.1111/1467-8454.00148
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