International R&D Rivalry and Industrial Strategy

Barbara Spencer () and James A. Brander

Working Papers from Queen's University, Department of Economics

Abstract: 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.

Date: 1982

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Working Paper: International R&D Rivalry and Industrial Strategy (1983)
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Persistent link: http://EconPapers.repec.org/RePEc:qed:wpaper:518

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