Knowledge transfer, transitional dynamics and optimal Research & Development policy in a dynamic monopoly setting

Jürgen Antony and Torben Klarl

No 2001, Bremen Papers on Economics & Innovation from University of Bremen, Faculty of Business Studies and Economics

Abstract: This paper focuses on the question whether or not a reduction of the knowledge barrier is good for welfare. Based on a dynamic monopoly setting with simultaneous investment decisions in process as well as in product Research & Development (R&D), we show that a reduction of the knowledge barrier has ambiguous welfare consequences: Due to a lower knowledge barrier, product quality and welfare increase in the short-run. However, this may not necessarily be the case in the long-run. One reason is that a positive long-lasting knowledge barrier shock triggers the monopolist to sub-optimally lower its product R&D investments today and in the future at the cost of future product quality. This in turn may reduce welfare. Accordingly, to realize the first-best level of product quality, the long-run optimal R&D subsidy rate for product innovations increase with a reduction of the knowledge barrier.

Keywords: Process and product innovation; learning by doing; knowledge spillovers; optimal taxation; dynamic monopoly analysis (search for similar items in EconPapers)
JEL-codes: C4 D4 D6 D9 L1 O3 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2020-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Review of Industrial Organization, 57(3), pp.579-606.

Downloads: (external link)
https://media.suub.uni-bremen.de/bitstream/elib/3598/1/00108533-1.pdf

Related works:
Journal Article: Knowledge Transfer, Transitional Dynamics and Optimal Research & Development Policy in a Dynamic Monopoly Setting (2020)
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:atv:wpaper:2001

DOI: 10.26092/elib/201

Access Statistics for this paper

More papers in Bremen Papers on Economics & Innovation from University of Bremen, Faculty of Business Studies and Economics Contact information at EDIRC.
Bibliographic data for series maintained by Matheus Eduardo Leusin ().