Optimal Product R&D Policies with Endogenous Quality Choices and Unilateral Spillover

Taba Yumiko ()
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Taba Yumiko: Faculty of Education and Integrated Arts and Sciences, Waseda University, Nishi-Waseda 1-6-1, Shinjuku-ku, Tokyo 196-8050, Japan

The B.E. Journal of Economic Analysis & Policy, 2016, vol. 16, issue 1, 365-391

Abstract: This study derives non-cooperative and cooperative optimal product research and development (R&D) policies of a country with a high-quality firm and a country with a low-quality firm in the presence of technology spillover under Cournot and Bertrand competitions in an international duopoly. When the respective governments determine their R&D policies non-cooperatively, optimal policies for both countries involve an R&D tax (subsidy) if spillover is large (small). When the governments choose their R&D policies cooperatively, a tax is always optimal for the country with low-quality firm and a subsidy (tax) is optimal for the country with high-quality firm if spillover is large (small). In addition, we show that the non-cooperative optimal product R&D Policy is tax for a wider range of spillover effects under Cournot competition, compared to the case of Bertrand competition.

Keywords: product R&D policy; endogenous quality choices; technology spillover (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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DOI: 10.1515/bejeap-2015-0090

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