Welfare Measures in Dynamic Firm R&D Games

Jannett Highfill () and Michael McAsey ()

International Advances in Economic Research, 2013, vol. 19, issue 4, 439-449

Abstract: The present paper examines the welfare effects of a dynamic Research and Development (R&D) game at the firm level in a two-country, two-firm, intra-industry trade context. Economists do not use the trade balance as a measure of economic welfare, but it is often used in the public arena. The primary result of the paper is that the dynamic time path of social surplus and the trade balance do not track well together. This paper suggests that economists thinking about dynamic R&D games will have to defend imports as having a positive effect on social surplus regardless of trade balance effects. Copyright International Atlantic Economic Society 2013

Keywords: Differential games; Innovation competition; Product reliability; D92; O31; F12 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1007/s11294-013-9425-0

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