Mixed ownership and R&D under discriminatory output subsidies

Jiaqi Chen, Sang-Ho Lee and Timur Muminov

MPRA Paper from University Library of Munich, Germany

Abstract: This study considers a (partially privatized) semi-public firm in a mixed duopoly and examines the welfare effects of discriminatory output subsidies under R&D competition. We find that the government grants higher subsidies to the private firm than to the semi-public firm, which induces the private firm to invest more in R&D and to produce a higher output than the semi-public firm. We also show that optimal subsidy rates are higher (lower) than uniform subsidy rates for a sufficiently high (low) degree of privatization, which could decrease (increase) social welfare. This finding sharply contrasts to the case that the committed discriminatory output subsidy always yields the highest welfare compared to non-committed cases.

Keywords: mixed ownership; time-consistency; discriminatory output subsidies; R&D competition (search for similar items in EconPapers)
JEL-codes: D4 L1 L3 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-com, nep-ind and nep-reg
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https://mpra.ub.uni-muenchen.de/105015/1/MPRA_paper_105015.pdf original version (application/pdf)

Related works:
Journal Article: Welfare-reducing discriminatory output subsidies with mixed ownership and R&D (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:105015

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