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Inducing R&D investment with price ceilings

Author

Listed:
  • Youping Li

    () (Department of Economics, University of Tennessee)

  • Cristina M. Reiser

    () (Department of Economics, University of Tennessee)

  • Zhou Yang

    () (Department of Economics, University of Tennessee)

Abstract

Though government intervention is prevalent in the market for research and development (R&D), most literature has focused on the use of subsidies, patents or joint research ventures to obtain the efficient R&D investment. By using a two-stage duopoly model in which firms first choose the level of investment and then output, our paper shows that the introduction of a price ceiling by the regulator will result in the optimal level of R&D. This interesting but counterintuitive result contrasts with the existing literature and advances our understanding about price ceilings.

Suggested Citation

  • Youping Li & Cristina M. Reiser & Zhou Yang, 2010. "Inducing R&D investment with price ceilings," Economics Bulletin, AccessEcon, vol. 30(2), pages 1548-1553.
  • Handle: RePEc:ebl:ecbull:eb-10-00250
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I2-P142.pdf
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    References listed on IDEAS

    as
    1. Darmot Leahy & J. Peter Neary, 1997. "Veřejná politiky v oblasti výzkumu a vývoje v oligopolním průmyslu
      [Public Policy Towards R & D in Oligopolistic Industry]
      ," Politická ekonomie, University of Economics, Prague, vol. 1997(5), pages 683-698.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Curran, Louise & Lv, Ping & Spigarelli, Francesca, 2017. "Chinese investment in the EU renewable energy sector: Motives, synergies and policy implications," Energy Policy, Elsevier, vol. 101(C), pages 670-682.

    More about this item

    Keywords

    Research and development; Subsidy; Price ceiling;

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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