International R&D Rivalry and Industrial Strategy

Barbara Spencer and James Brander

No 1192, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper presents a theory of government intervention which provides an explanation for "industrial strategy" policies such as R&D or export subsidies in imperfectly competitive international markets. Each producing country has an incentive to try to capture a greater share of rent-earning industries using subsidies, but the subsidy-ridden international equilibrium is jointly suboptimal. The equilibrium in the strategic game involving firms and governments is modelled as a three stage subgame perfect Nash equilibrium. The assumption that the government is the first player in this game allows it to influence equilibrium industry outcomes by altering the set of credible actions open to firms.

Date: 1983-08
Note: ITI IFM
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Published as Spencer, Barbara J. and James A. Brander. "International R&D Rivalry and Industrial Strategy." Review of Economic Studies, Vol. 50, No. 163, (October 1983), pp. 707-722.

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Journal Article: International R & D Rivalry and Industrial Strategy (1983)
Working Paper: International R & D Rivalry and Industrial Strategy (1983)
Working Paper: International R&D Rivalry and Industrial Strategy (1982)
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