The Sensitivity of Strategic and Corrective R&D Policy in Battles for Monopoly

Kyle Bagwell and Robert Staiger

International Economic Review, 1992, vol. 33, issue 4, 795-816

Abstract: The authors characterize the role for R&D subsidies in export markets where R&D is an uncertain process and the winner of the R&D competition monopolizes the market. Investments are assumed to induce either first order or mean-preserving second order shifts in the distribution of a firm's costs or, reinterpreting the model as a patent race, a firm's discovery dates. The authors show that, regardless of which form the uncertainty takes, a national strategic incentive to subsidize R&D exists but must be balanced against a national corrective incentive to tax R&D whenever a country has multiple firms involved in the R&D competition. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1992
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Related works:
Working Paper: The Sensitivity of Strategic and Corrective R&D Policy in Battles for Monopoly (1990)
Working Paper: The Sensitivity of Strategic and Corrective R&D Policy in Battles for Monopoly (1989)
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