IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Sensitivity of Strategic and Corrective R&D Policy in Battles for Monopoly

  • Kyle Bagwell
  • Robert W. Staiger

We characterize the strategic and corrective role for R&D subsidies in an export market where R&D is an uncertain process and where the winner of the R&D competition monopolizes the market. Investments in R&D are assumed to induce either first order or mean-preserving second order shifts in the distribution of (i) a firm's costs, with the low cost firm then monopolizing the product market or, under a reinterpretation of the model, (ii) a firm's discovery dates, with the first firm to make the discovery enjoying patent protection of infinite duration. We show that, regardless of which form uncertainty takes in the R&D process, a national strategic incentive to subsidize R&D exists, but must be balanced against a national corrective incentive to tax R&D whenever a country has more than one firm involved in the R&D competition. We conclude that an R&D subsidy is likely to be attractive in markets where scale economies are sufficiently large that firms battle for the eventual monopoly position, provided only that the number of domestic firms involved in the R&D stage is low.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.kellogg.northwestern.edu/research/math/papers/868.pdf
File Function: main text
Download Restriction: no

Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 868.

as
in new window

Length:
Date of creation: Aug 1989
Date of revision:
Handle: RePEc:nwu:cmsems:868
Contact details of provider: Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
Phone: 847/491-3527
Fax: 847/491-2530
Web page: http://www.kellogg.northwestern.edu/research/math/
Email:


More information through EDIRC

Order Information: Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Jonathan Eaton & Gene M. Grossman, 1983. "Optimal Trade and Industrial Policy Under Oligopoly," NBER Working Papers 1236, National Bureau of Economic Research, Inc.
  2. Krishna, K. & Thursby, M., 1991. "Optimal Polocies with Strategic Distortions," Purdue University Economics Working Papers 1004, Purdue University, Department of Economics.
  3. James A. Brander & Barbara J. Spencer, 1984. "Export Subsidies and International Market Share Rivalry," NBER Working Papers 1464, National Bureau of Economic Research, Inc.
  4. Kyle Bagwell & Robert W. Staiger, 1989. "The Sensitivity of Strategic and Corrective R&D Policy in Oligopolistic Industries," Discussion Papers 869, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
  6. Cheng, Leonard K, 1987. "Optimal Trade and Technology Policies: Dynamic Linkages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(3), pages 757-76, October.
  7. Sudipto Bhattacharya & Dilip Mookherjee, 1986. "Portfolio Choice in Research and Development," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 594-605, Winter.
  8. Avinash K. Dixit & Gene M. Grossman, 1987. "Targeted Export Promotion with Several Oligopolistic Industries," NBER Working Papers 1344, National Bureau of Economic Research, Inc.
  9. Glenn C. Loury, 1976. "Market Structure and Innovation," Discussion Papers 256, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Partha Dasgupta & Joseph Stiglitz, 1980. "Uncertainty, Industrial Structure, and the Speed of R&D," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 1-28, Spring.
  11. David M. Kreps & Jose A. Scheinkman, 1983. "Quantity Precommitment and Bertrand Competition Yield Cournot Outcomes," Bell Journal of Economics, The RAND Corporation, vol. 14(2), pages 326-337, Autumn.
  12. Rogerson, William P, 1985. "The First-Order Approach to Principal-Agent Problems," Econometrica, Econometric Society, vol. 53(6), pages 1357-67, November.
  13. Hadar, Josef & Russell, William R, 1969. "Rules for Ordering Uncertain Prospects," American Economic Review, American Economic Association, vol. 59(1), pages 25-34, March.
  14. Tor Klette & David de Meza, 1986. "Is the Market Biased Against Risky R&D?," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 133-139, Spring.
  15. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
  16. Lee, Tom & Wilde, Louis L, 1980. "Market Structure and Innovation: A Reformulation," The Quarterly Journal of Economics, MIT Press, vol. 94(2), pages 429-36, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:nwu:cmsems:868. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fran Walker)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.