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Beat Em or Join Em: Export Subsidies versus International Research Joint Ventures in Oligopolistic Markets

  • J.P. Neary
  • P O''Sullivan

This paper compares adversarial with cooperative industrial and trade policies in a dynamic oligopoly game in which a home and foreign firm compete in R&D and output and, because of spillovers, each firm benefits from the other's R&D. When the government can commit to an export subsidy, such a policy raises welfare relative to cooperation, except when R&D is highly effective and spillovers are near-complete. Without commitment, however, subsidisation may yield welfare levels much lower than cooperation and lower even than free trade, though qualifications to the dangers from no commitment are noted.

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File URL: http://cep.lse.ac.uk/pubs/download/DP0408.pdf
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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0408.

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Date of creation: Nov 1998
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Handle: RePEc:cep:cepdps:dp0408
Contact details of provider: Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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  1. Goldberg, Pinelopi Koujianou, 1995. "Strategic Export Promotion in the Absence of Government Precommitment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(2), pages 407-26, May.
  2. D. Leahy & J. P. Neary, 1997. "R&D spillovers and the case for industrial policy in an open economy," LSE Research Online Documents on Economics 20342, London School of Economics and Political Science, LSE Library.
  3. J. Peter Neary, 1990. "Cost asymmetries in international subsidy games : should governments help winners or losers?," Working Papers 199008, School of Economics, University College Dublin.
  4. Dermot Leahy & J. Peter Neary, 1995. "International R&D rivalry and industrial strategy without government commitment," Working Papers 199509, School of Economics, University College Dublin.
  5. Maggi, G. & Grossman, G., 1997. "Free Trade vs Strategic Trade: A Peek into Pandora's Box," Papers 190, Princeton, Woodrow Wilson School - Public and International Affairs.
  6. Neary, J Peter & Leahy, Dermot, 2000. "Strategic Trade and Industrial Policy towards Dynamic Oligopolies," Economic Journal, Royal Economic Society, vol. 110(463), pages 484-508, April.
  7. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  8. Maskin, Eric S & Newbery, David M, 1990. "Disadvantageous Oil Tariffs and Dynamic Consistency," American Economic Review, American Economic Association, vol. 80(1), pages 143-56, March.
  9. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
  10. Barbara J. Spencer & James A. Brander, 1982. "Strategic Commitment with R&D: The Symmetric Case," Working Papers 516, Queen's University, Department of Economics.
  11. repec:oup:restud:v:66:y:1999:i:2:p:447-74 is not listed on IDEAS
  12. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 383-406.
  13. Karp, Larry S. & Perloff, Jeffrey M., 1995. "The failure of strategic industrial policies due to manipulation by firms," International Review of Economics & Finance, Elsevier, vol. 4(1), pages 1-16.
  14. Seade, Jesus, 1980. "The stability of cournot revisited," Journal of Economic Theory, Elsevier, vol. 23(1), pages 15-27, August.
  15. A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
  16. Maria E. Muniagurria & Nirvikar Singh, 1994. "Foreign Technology, Spillovers and R&D Policy," Development and Comp Systems 9411001, EconWPA.
  17. Kamien, Morton I & Muller, Eitan & Zang, Israel, 1992. "Research Joint Ventures and R&D Cartels," American Economic Review, American Economic Association, vol. 82(5), pages 1293-306, December.
  18. repec:oup:restud:v:50:y:1983:i:4:p:707-22 is not listed on IDEAS
  19. D Leahy & J.P. Neary, 1995. "Public Policy Towards R&D in Oligopolistic Industries," CEP Discussion Papers dp0270, Centre for Economic Performance, LSE.
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