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R&D Policy Involving Consumer-Friendly Strategy: Cooperative and Non-Cooperative R&D

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  • Ya-Chin Wang

    () (Kun Shan University
    Kun Shan University)

Abstract

Abstract In a highly globalized economy, foreign exporting firms have initiatives to be consumer friendly for many reasons. The aim of the present paper is to endogenize consumer-friendly actions by the exporting firms, and explore how government’s industrial policy and firm’s R&D investment are affected by the strategy of foreign exporting firms under cooperative and non-cooperative R&D commitments in an international rivalry market. It finds that consumer-friendly action is a dominant strategy equilibrium, and no matter whether under cooperative or non-cooperative R&D, a consumer-friendly firm tends to invest less than does the purely profit-maximizing firm on R&D under symmetrical decisions. In the case of firms cooperating in R&D and involving consumer-friendliness in action, their governments need not intervene. On the other hand, governments always subsidize non-cooperative R&D activities, or cooperative but unfriendly firms. Furthermore, the consumer-friendly action will result in more (less) R&D subsidies by the exporting government when both firms non-cooperate (cooperate) in R&D. Finally, it is robust to indicate that the government of an importing country prefers friendly foreign firms in any circumstances. Above all, the equilibrium outcomes explain the crucial role of consumer-friendly strategy for industrial policies and R&D activities.

Suggested Citation

  • Ya-Chin Wang, 2016. "R&D Policy Involving Consumer-Friendly Strategy: Cooperative and Non-Cooperative R&D," Journal of Industry, Competition and Trade, Springer, vol. 16(2), pages 257-272, June.
  • Handle: RePEc:kap:jincot:v:16:y:2016:i:2:d:10.1007_s10842-015-0206-8
    DOI: 10.1007/s10842-015-0206-8
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    References listed on IDEAS

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    More about this item

    Keywords

    Cost-reducing R&D; Consumer-friendly strategy; R&D policy; Cooperative R&D;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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