Public Policy towards R&D in Oligopolistic Industries

Dermot Leahy and J. Peter Neary

American Economic Review, 1997, vol. 87, issue 4, 642-62

Abstract: The authors consider the free-market and socially optimal outcomes in a general oligopoly model with many firms which first engage in R&D and then compete in either output or price. Strategic behavior by firms tends to reduce output, R&D, and welfare and so justifies higher subsidies except when R&D spillovers are low and firms' actions are strategic substitutes. It also reduces the benefits of R&D cooperation. Moreover, 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. Copyright 1997 by American Economic Association.

Date: 1997
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Related works:
Working Paper: Public Policy Towards R&D in Oligopolistic Industries (1995)
Working Paper: Public Policy Towards R&D in Oligopolistic Industries (1995)
Working Paper: Public policy towards R&D in oligopolistic industries (1995)
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