Competitiveness of Firm Behavior and Public Policy for New Technology Adoption in an Oligopoly

Masahiko Hattori () and Yasuhito Tanaka

Journal of Industry, Competition and Trade, 2017, vol. 17, issue 2, No 1, 135-151

Abstract: Abstract Economic growth requires that firms adopt new technologies. However, it may be insufficient or excessive in less competitive industries from the social welfare point of view. In this case, a government subsidy or tax is necessary. We analyze the optimum subsidy or tax policy for new technology adoption by firms when firms maximize the weighted average of absolute and relative profits. We do not consider that firms really maximize the weighted average, but the weight on the relative profit is used as a parameter indicating competitiveness of firm behavior. We show that the optimum policy is likely to be subsidization (or taxation) when the set-up cost for new technology adoption is large (or small). It is likely to be subsidization (or taxation) when competitiveness is large (or small), that is, it is near to perfect competition (or joint profit maximization).

Keywords: Competitiveness; Subsidy or tax policy; New technology adoption; Oligopoly (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10842-016-0231-2

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