International R&D Rivalry and Industrial Strategy without Government Commitment

Dermot Leahy and J. Peter Neary

No 1199, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We examine optimal industrial and trade policies in a series of dynamic oligopoly games in which a home and a foreign firm compete in R&D and output. Alternative assumptions about the timing of moves and the ability of agents to commit intertemporally are considered. We show that the home export subsidy, R&D subsidy and welfare are higher in an equilibrium in which government commitment is credible than in the dynamically consistent equilibrium without commitment. Commitment yields gains but so does unanticipated reneging, whereas reneging which is anticipated by firms yields the lowest welfare of all.

Keywords: Commitment; Dynamic Consistency; Export Subsidies; R&D Subsidies; Research and Development; Strategic Trade Policy (search for similar items in EconPapers)
JEL-codes: F12 L13 (search for similar items in EconPapers)
Date: 1995-06
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Citations: View citations in EconPapers (22)

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Related works:
Journal Article: International R&D Rivalry and Industrial Strategy without Government Commitment (1996)
Working Paper: International R&D rivalry and industrial strategy without government commitment (1995)
Working Paper: International R&D rivalry and industrial strategy without government commitment (1995)
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