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. Domestic net welfare improves by capturing a greater share of the output of rent earning industries, although the subsidy-ridden noncooperative international equilibrium is jointly suboptimal. Behaviour of governments and firms is modelled as a three-stage subgame perfect Nash equilibrium. The assumption that government is the first player allows it to influence equilibrium outcomes by altering the set of credible actions by the firm.
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|Date of creation:||1982|
|Date of revision:|
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Web page: http://qed.econ.queensu.ca/
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- Frenkel, Jacob A, 1971. "On Domestic Demand and Ability to Export," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 668-72, May-June.
- Gilbert, Richard J & Harris, Richard G, 1981. "Investment Decisions with Economies of Scale and Learning," American Economic Review, American Economic Association, vol. 71(2), pages 172-77, May.
- Dixit, Avinash, 1979.
"The Role of Investment in Entry-Deterrence,"
The Warwick Economics Research Paper Series (TWERPS)
140, University of Warwick, Department of Economics.
- Auquier, A A & Caves, R E, 1979. "Monopolistic Export Industries, Trade Taxes, and Optimal Competition Policy," Economic Journal, Royal Economic Society, vol. 89(355), pages 559-81, September.
- James A. Brander & Barbara J. Spencer, 1980.
"Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry,"
414, Queen's University, Department of Economics.
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- A. Michael Spence, 1977. "Entry, Capacity, Investment and Oligopolistic Pricing," Bell Journal of Economics, The RAND Corporation, vol. 8(2), pages 534-544, Autumn.
- David Kreps & Robert Wilson, 1999.
"Reputation and Imperfect Information,"
Levine's Working Paper Archive
238, David K. Levine.
- B. Curtis Eaton & Richard G. Lipsey, 1980. "Exit Barriers are Entry Barriers: The Durability of Capital as a Barrier to Entry," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 721-729, Autumn.
- Flaherty, M Therese, 1980. "Industry Structure and Cost-Reducing Investment," Econometrica, Econometric Society, vol. 48(5), pages 1187-1209, July.
- Barbara J. Spencer & James A. Brander, 1982. "Tariff Protection and Imperfect Competition," Working Papers 517, Queen's University, Department of Economics.
- Basevi, Giorgio, 1970. "Domestic Demand and Ability to Export," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 330-37, March-Apr.
- Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-89, March.
- 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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