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R&D Subsidies, Spillovers and Privatization in Mixed Markets

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  • Maria José Gil Moltó

    ()

  • Joanna Poyago.Theotoky
  • Vasileios Zikos

Abstract

We examine the use of subsidies to R&D in a mixed and a private duopoly market. We show that the socially optimal R&D subsidy is increasing in the degree of spillovers but it is lower in the private duopoly. The optimal R&D subsidy leads to an increase in total R&D and production, however, it does not lead to the equalisation of per firm output and therefore to an efficient distribution of production costs. We also find that privatization of the public firm reduces R&D activity and welfare in the duopoly market. This result stands even when optimal R&D subsidies are provided.

Suggested Citation

  • Maria José Gil Moltó & Joanna Poyago.Theotoky & Vasileios Zikos, 2010. "R&D Subsidies, Spillovers and Privatization in Mixed Markets," Discussion Papers in Economics 10/19, Department of Economics, University of Leicester.
  • Handle: RePEc:lec:leecon:10/19
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    Keywords

    mixed duopoly; process innovation; R&D subsidies; privatization; spillovers.;

    JEL classification:

    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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