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Research joint ventures and optimal R&D policy with asymmetric information

  • Cassiman, Bruno

When to allow Research Joint Ventures (RJVs) or not is an important instrument in the development of an optimal R&D policy. The regulator, however, is unlikely to know all the relevant information to regulate R&D optimally. The extent to which there exist appropriability problems between the firms is one such variable that is private information to the firms in the industry. In a duopoly setting we analyze the characteristics of a second-best R&D policy where the government can either allow RJVs or not and give lump-sum subsidies to the parties involved. The second-best R&D policy without subsidies will either block some welfare improving RJVs or allow some welfare reducing ones. With lump-sum subsidies, the second-best policy trades off the expected subsidy cost with allowing welfare decreasing RJVs or blocking welfare increasing ones.

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Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 18 (2000)
Issue (Month): 2 (February)
Pages: 283-314

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Handle: RePEc:eee:indorg:v:18:y:2000:i:2:p:283-314
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

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