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International R & D Rivalry and Industrial Strategy

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  • Barbara J. Spencer

    (Boston College)

  • James A. Brander

    (Queen's University)

Abstract

This paper presents a theory of government intervention which provides an explanation for "industrial strategy" policies such as R&D or export subsidies in imperfectly competitive international markets. Domestic net welfare improves by capturing a greater share of the output of rent earning industries, although the subsidy-ridden noncooperative international equilibrium is jointly suboptimal. Behaviour of governments and firms is modelled as a three-stage subgame perfect Nash equilibrium. The assumption that government is the first player allows it to influence equilibrium outcomes by altering the set of credible actions by the firm.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Barbara J. Spencer & James A. Brander, 1983. "International R & D Rivalry and Industrial Strategy," Boston College Working Papers in Economics 118, Boston College Department of Economics.
  • Handle: RePEc:boc:bocoec:118
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    References listed on IDEAS

    as
    1. R. E. Caves & M. E. Porter, 1977. "From Entry Barriers to Mobility Barriers: Conjectural Decisions and Contrived Deterrence to New Competition," The Quarterly Journal of Economics, Oxford University Press, vol. 91(2), pages 241-261.
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    6. James A. Brander & Barbara J. Spencer, 1981. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Canadian Journal of Economics, Canadian Economics Association, vol. 14(3), pages 371-389, August.
    7. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, vol. 27(2), pages 253-279, August.
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    9. James A. Brander & Barbara J. Spencer, 1983. "Strategic Commitment with R&D: The Symmetric Case," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 225-235, Spring.
    10. Gilbert, Richard J & Harris, Richard G, 1981. "Investment Decisions with Economies of Scale and Learning," American Economic Review, American Economic Association, vol. 71(2), pages 172-177, May.
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    13. Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Paper 517, Economics Department, Queen's University.
    14. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 3-13.
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