Strategic R and D investments with uncertainty

Toshihiro Matsumura

Economics Bulletin, 2003, vol. 12, issue 1, 1-7

Abstract: I introduce uncertainty into the model of strategic cost-reducing R and D investments and reexamine welfare implications. I discuss two models. In one model an increase in expenditure decreases production costs when R\&D succeeds, and in the other model it increases probability of success. I show that two models yield completely different implications for tax-subsidy policies on R and D investments. In the former model equilibrium investment level is always too low from the viewpoint of social welfare, while in the latter model it can be either too low or too high and relatively risky (safe) investments should be subsidized (taxed).

Keywords: production; substitution (search for similar items in EconPapers)
JEL-codes: D4 L1 (search for similar items in EconPapers)
Date: 2003-06-13
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.accessecon.com/pubs/EB/2003/Volume12/EB-03L10004A.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-03l10004

Access Statistics for this article

More articles in Economics Bulletin from AccessEcon
Bibliographic data for series maintained by John P. Conley ().