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Beat 'Em or Join 'Em?: Export Subsidies Versus International Research Joint Ventures in Oligopolistic Markets

  • Neary, J Peter

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, subsidization 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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1916.

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Date of creation: Jun 1998
Date of revision:
Handle: RePEc:cpr:ceprdp:1916
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  1. 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.
  2. Neary, J. Peter, 1994. "Cost asymmetries in international subsidy games: Should governments help winners or losers?," Journal of International Economics, Elsevier, vol. 37(3-4), pages 197-218, November.
  3. Brander, James A. & Spencer, Barbara J., 1985. "Export subsidies and international market share rivalry," Journal of International Economics, Elsevier, vol. 18(1-2), pages 83-100, February.
  4. repec:tpr:qjecon:v:101:y:1986:i:2:p:383-406 is not listed on IDEAS
  5. 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.
  6. Seade, Jesus, 1980. "The stability of cournot revisited," Journal of Economic Theory, Elsevier, vol. 23(1), pages 15-27, August.
  7. Neary, J.P. & Leahy, D., 1998. "Strategic Trade and Industrial Policy Towards Dynamic Oligopolies," Papers 98/14, College Dublin, Department of Political Economy-.
  8. repec:oup:restud:v:66:y:1999:i:2:p:447-74 is not listed on IDEAS
  9. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
  10. Grossman, Gene & Maggi, Giovanni, 1998. "Free Trade Vs. Strategic Trade: A Peek into Pandora's Box," CEPR Discussion Papers 1784, C.E.P.R. Discussion Papers.
  11. repec:oup:restud:v:50:y:1983:i:4:p:707-22 is not listed on IDEAS
  12. Dermot Leahy & J. Peter Neary, 1995. "International R&D rivalry and industrial strategy without government commitment," Working Papers 199512, School of Economics, University College Dublin.
  13. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  14. 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.
  15. Maria E. Muniagurria & Nirvikar Singh, 1994. "Foreign Technology, Spillovers and R&D Policy," Development and Comp Systems 9411001, EconWPA.
  16. D Leahy & J.P. Neary, 1995. "Public Policy Towards R&D in Oligopolistic Industries," CEP Discussion Papers dp0270, Centre for Economic Performance, LSE.
  17. 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.
  18. repec:oup:qjecon:v:101:y:1986:i:2:p:383-406 is not listed on IDEAS
  19. A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
  20. 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.
  21. 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.
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