Subsidizing new technology adoption in a Stackelberg duopoly: Cases of substitutes and complements

Masahiko Hattori () and Yasuhito Tanaka

MPRA Paper from University Library of Munich, Germany

Abstract: Economic growth requires that firms adopt new technologies. However, it may be insufficient in less competitive industries from the social welfare point of view. In this case, a government subsidy is necessary. We present an analysis of firms' adoption of new technology and government subsidization policy in a Stackelberg duopoly with differentiated goods. The technology itself is free, but each firm must expend a fixed set-up cost, such as training employees. There are several cases related to optimal policies depending on the set-up costs and whether the goods are substitutes or complements. In particular, there are two cases. (1) Social welfare is maximized when only the Stackelberg leader adopts the new technology, but no firm adopts the new technology without a subsidy. Then, the government should subsidize only the leader, which is a discriminatory policy. (Case 5 of Theorem 1 and Case 3-(1)-ii of Theorem 2) (2) Social welfare is maximized when both firms adopt the new technology, but only the leader adopts the new technology without a subsidy. Then, the government should subsidize only the follower. This policy is not discriminatory because adoption is the dominant strategy for the leader. (Case 2 of Theorem 1)

Keywords: Stackelberg; duopoly; \and; adoption; of; new; technology; \and; subsidization; \and; sub-game; perfect; equilibrium (search for similar items in EconPapers)
JEL-codes: D43 (search for similar items in EconPapers)
Date: 2016-05-02
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind, nep-ino and nep-pke
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/71044/1/MPRA_paper_71044.pdf original version (application/pdf)

Related works:
Journal Article: Subsidizing New Technology Adoption in a Stackelberg Duopoly: Cases of Substitutes and Complements (2016)
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:pra:mprapa:71044

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().