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Whither Flat Panel Displays?

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  • Kala Krishna
  • Marie Thursby

Abstract

This paper examines possible consequences of subsidies to R&D and to volume production proposed under the Clinton administration's flat panel display initiative. We do this in the context of a model in which firms behave competitively in the short run, while realizing that their choices of capacity and yield-improving R&D in the medium and long run will affect market price. Policy simulations show that steady state yields and profits are lower, while prices are higher with subsidies for capacity acquisition than with R&D subsidies. This occurs because a firm's incentives to do R&D are diminished by a subsidy on capacity costs.

Suggested Citation

  • Kala Krishna & Marie Thursby, 1996. "Whither Flat Panel Displays?," NBER Working Papers 5415, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:5415
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    References listed on IDEAS

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    1. Richard E. Baldwin & Paul Krugman, 1986. "Market Access and International Competition: A Simulation Study of 16K Random Access Memories," NBER Working Papers 1936, National Bureau of Economic Research, Inc.
    2. Richard Jensen & Marie Thursby, 1987. "A Decision Theoretic Model of Innovation, Technology Transfer, and Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 54(4), pages 631-647.
    3. Jeffrey J. Schott, 1994. "Uruguay Round: An Assessment," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 64, January.
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    JEL classification:

    • F1 - International Economics - - Trade
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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