Competitiveness and subsidy or tax policy for new technology adoption in duopoly

Masahiko Hattori () and Yasuhito Tanaka

MPRA Paper from University Library of Munich, Germany

Abstract: We consider a problem of subsidy or tax policy for new technology adoption by duopolistic firms. The technology is developed in and transferred by a foreign country to the domestic country. It is free but each firm must expend some fixed set-up cost for education of its staff to adopt and use it. Assuming that each firm maximizes the weighted average of absolute and relative profits, we examine the relationship between competitiveness and subsidy or tax policies for technology adoption, and show that when firm behavior is not competitive (the weight on the relative profit is small), the optimal policy of the government may be taxation; when firm behavior is competitive (the weight on the relative profit is large), the optimal policy is subsidization or inaction and not taxation. However, if firm behavior is extremely competitive (close to perfect competition), taxation case re-emerges.

Keywords: new technology adoption; duopoly; subsidy; tax (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2016-10-21
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind and nep-pub
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Related works:
Journal Article: Competitiveness and Subsidy or Tax Policy for New Technology Adoption in Duopoly (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:74683

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