DP1243 Public Policy Towards R&D in Oligopolistic Industries
|Author(s):||Dermot Leahy, J Peter Neary|
|Publication Date:||October 1995|
|Keyword(s):||R&D Cooperation, R&D Spillovers, Research Development, Research Joint Ventures, Strategic Aspects, Subgame Perfect Equilibrium|
|JEL(s):||D43, L13, O32|
|Programme Areas:||Industrial Organization|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=1243|
This paper examines the free-market and socially-optimal outcomes in a dynamic oligopoly model with R&D spillovers. First-best optimal subsidies to R&D are higher when firms play strategically against each other, but lower when they cooperate on R&D (at least with high spillovers) and when they play strategically against the government. Second-best optimal subsidies to R&D are presumptively higher than first-best ones, but policies to encourage cooperation are likely to be redundant (since it is always privately profitable) and simulations suggest that the welfare cost of lax competition policy is high.