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A Reappraisal of the Irrelevance result in mixed duopoly: A note on R&D competition

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  • Vasileios Zikos

    (Department of Economics, Loughborough University)

Abstract

We characterize the optimal policy-mix towards R&D activity and output production in the simultaneous moves mixed and private duopolies, as well as in the Stackelberg mixed duopoly. Our findings suggest that the government will opt for implementing jointly a tax on R&D with a subsidy on output to tackle the underlying market failures. Moreover, the optimal output subsidy, R&D investment, output and welfare are identical irrespective of whether the public firm: (i) moves simultaneously with the private firm, (ii) is Stackelberg leader in R&D and/or output, or (iii) is privatized and acts simultaneously with the private firm to maximize profits. Privatization reduces the optimal tax on R&D, but leads to an increase in firms' profits. Finally, Stackelberg output leadership by the public firm induces an increase in R&D taxation, which is accompanied by a decrease in profits.

Suggested Citation

  • Vasileios Zikos, 2007. "A Reappraisal of the Irrelevance result in mixed duopoly: A note on R&D competition," Economics Bulletin, AccessEcon, vol. 12(8), pages 1-6.
    • Handle: RePEc:ebl:ecbull:eb-06l00004
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    References listed on IDEAS

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    1. María José Gil-Moltó & Joanna Poyago-Theotoky & Vasileios Zikos, 2006. "R&D policy and privatization in a mixed oligopoly," Discussion Paper Series 2006_25, Department of Economics, Loughborough University.
    2. Leahy, Dermot & Neary, J Peter, 1997. "Public Policy towards R&D in Oligopolistic Industries," American Economic Review, American Economic Association, vol. 87(4), pages 642-662, September.
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    6. Fjell, Kenneth & Heywood, John S., 2004. "Mixed oligopoly, subsidization and the order of firm's moves: the relevance of privatization," Economics Letters, Elsevier, vol. 83(3), pages 411-416, June.
    7. Gareth Myles, 2002. "Mixed oligopoly, subsidization and the order of firms' moves: an irrelevance result for the general case," Economics Bulletin, AccessEcon, vol. 12(1), pages 1-6.
    8. Poyago-Theotoky, Joanna, 1998. "R&D Competition in a Mixed Duopoly under Uncertainty and Easy Imitation," Journal of Comparative Economics, Elsevier, vol. 26(3), pages 415-428, September.
    9. Pal, Debashis, 1998. "Endogenous timing in a mixed oligopoly," Economics Letters, Elsevier, vol. 61(2), pages 181-185, November.
    10. María José Gil-Moltó & Joanna Poyago-Theotoky & Vasileios Zikos, 2006. "Public Policy towards R&D in a Mixed Duopoly with Spillovers," Discussion Paper Series 2006_17, Department of Economics, Loughborough University.
    11. Nett, Lorenz, 1994. "Why private firms are more innovative than public firms," European Journal of Political Economy, Elsevier, vol. 10(4), pages 639-653, December.
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    Citations

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    Cited by:

    1. Lee, Sang-Ho & Muminov, Timur K. & Tomaru, Yoshihiro, 2017. "Partial Privatization And Subsidization In A Mixed Duopoly: R&D Versus Output Subsidies," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 58(2), pages 163-177, December.
    2. Gamal Atallah, 2019. "Subsidizing Innovation and Production," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 42(84), pages 9-35.
    3. Lee, Sang-Ho & Tomaru, Yoshihiro, 2017. "Output and R&D subsidies in a mixed oligopoly," MPRA Paper 84410, University Library of Munich, Germany.
    4. Shoji Haruna & Rajeev K. Goel, 2017. "Output subsidies in mixed oligopoly with research spillovers," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 41(2), pages 235-256, April.
    5. Kojun Hamada, 2018. "Privatization Neutrality Theorem: When a Public Firm Pursues General Objectives," The Japanese Economic Review, Japanese Economic Association, vol. 69(1), pages 59-68, March.
    6. Maria José Gil-Moltó & Joanna Poyago-Theotoky & Vasileios Zikos, 2011. "R&D Subsidies, Spillovers, and Privatization in Mixed Markets," Southern Economic Journal, John Wiley & Sons, vol. 78(1), pages 233-255, July.
    7. Jiaqi Chen & Sang-Ho Lee & Timur K. Muminov, 2021. "Welfare-reducing discriminatory output subsidies with mixed ownership and R&D," Economics Bulletin, AccessEcon, vol. 41(3), pages 1592-1602.
    8. Sang‐Ho Lee & Timur K. Muminov, 2021. "R&D Information sharing in a mixed duopoly and incentive subsidy for research joint venture competition," Bulletin of Economic Research, Wiley Blackwell, vol. 73(2), pages 154-170, April.
    9. Jiaqi Chen & Sang‐Ho Lee & Timur K. Muminov, 2022. "R&D spillovers, output subsidies, and privatization in a mixed duopoly: Flexible versus irreversible R&D investments," Bulletin of Economic Research, Wiley Blackwell, vol. 74(3), pages 879-899, July.
    10. Garcia, Arturo & Leal, Mariel & Lee, Sang-Ho, 2018. "A new irrelevance result in an endogenous timing with a consumer-friendly public firm," MPRA Paper 85648, University Library of Munich, Germany.
    11. Lee, Sang-Ho & Muminov, Timur, 2020. "R&D Spillovers and Welfare Effect of Privatization with an R&D Subsidy," MPRA Paper 99937, University Library of Munich, Germany.
    12. Lee, Sang-Ho & Muminov, Timur, 2020. "Partial privatization and subsidization in a time-consistent policy: output versus R&D subsidies," MPRA Paper 99861, University Library of Munich, Germany.

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    More about this item

    Keywords

    mixed duopoly;

    JEL classification:

    • L0 - Industrial Organization - - General
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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