International R&D Rivalry and Industrial Strategy
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. Each producing country has an incentive to try to capture a greater share of rent-earning industries using subsidies, but the subsidy-ridden international equilibrium is jointly suboptimal. The equilibrium in the strategic game involving firms and governments is modelled as a three stage subgame perfect Nash equilibrium. The assumption that the government is the first player in this game allows it to influence equilibrium industry outcomes by altering the set of credible actions open to firms.
|Date of creation:||Aug 1983|
|Publication status:||published as Spencer, Barbara J. and James A. Brander. "International R&D Rivalry and Industrial Strategy." Review of Economic Studies, Vol. 50, No. 163, (October 1983), pp. 707-722.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- James A. Brander & Barbara J. Spencer, 1980. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Working Papers 414, Queen's University, Department of Economics.
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- Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
- 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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