International Tariffs in a Mixed Oligopoly with Research Spillovers

Haruna Shoji and Rajeev Goel
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Haruna Shoji: Department of Economics, Fukuyama University, Fukuyama, Hiroshima Prefecture, 729-0292, Japan

Peace Economics, Peace Science, and Public Policy, 2016, vol. 22, issue 3, 277-293

Abstract: This paper merges three strands of the literature – industrial organization, international trade, and economics of technical change – to examine the effect of tariffs on international mixed oligopolies which conduct research and development (R&D) that is prone to spillovers. Mixed oligopolies are prevalent in the defense sector, among other sectors. Using a two-stage sequential game with R&D in the first stage and production in the second stage, results show that higher tariffs reduce outputs of both the domestic public firm and foreign private firms, and private R&D. Effects on domestic R&D and welfare, and profits of foreign private firms depend upon spillovers. Within a large range of research spillovers, higher tariffs can in fact lower welfare. Some of these findings are different from traditional oligopolies and from models that ignore research spillovers. Policy implications are discussed.

Keywords: mixed oligopoly; R&D; spillovers; cost reduction; import tariffs; defense sector (search for similar items in EconPapers)
JEL-codes: F19 L22 O33 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (2)

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DOI: 10.1515/peps-2016-0007

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