A Reappraisal of the Irrelevance result in mixed duopoly: A note on R&D competition

Vasileios Zikos

Economics Bulletin, 2007, vol. 12, issue 8, 1-6

Abstract: We characterize the optimal policy-mix towards R&D activity and output production in the simultaneous moves mixed and private duopolies, as well as in the Stackelberg mixed duopoly. Our findings suggest that the government will opt for implementing jointly a tax on R&D with a subsidy on output to tackle the underlying market failures. Moreover, the optimal output subsidy, R&D investment, output and welfare are identical irrespective of whether the public firm: (i) moves simultaneously with the private firm, (ii) is Stackelberg leader in R&D and/or output, or (iii) is privatized and acts simultaneously with the private firm to maximize profits. Privatization reduces the optimal tax on R&D, but leads to an increase in firms' profits. Finally, Stackelberg output leadership by the public firm induces an increase in R&D taxation, which is accompanied by a decrease in profits.

Keywords: mixed; duopoly (search for similar items in EconPapers)
JEL-codes: L0 L3 (search for similar items in EconPapers)
Date: 2007-04-05
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Citations: View citations in EconPapers (14)

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