Patents versus Subsidies � A Laboratory Experiment

Donja Darai (), Jens Grosser () and Nadja Trhal

No 905, SOI - Working Papers from Socioeconomic Institute - University of Zurich

Abstract: This paper studies the effects of patents and subsidies on R&D investment decisions. The theoretical framework is a two-stage game consisting of an investment and a market stage. In equilibrium, both patents and subsidies induce the same amount of R&D investment, which is higher than the investment without governmental incentives. In the first stage, the firms can invest in a stochastic R&D project which might lead to a reduction of the marginal production costs and in the second stage, the firms face price competition. Both stages of the game are implemented in a laboratory experiment and the obtained results support the theoretical predictions. Patents and subsidies increase investment in R&D and the observed amounts of investment in the patent and subsidy treatment do not differ significantly across both instruments. However, we observe overinvestment in all three treatments. Observed prices in the market stage converge to equilibrium price levels.

Keywords: R&D investment; oligopoly; patents; subsidies; experiment (search for similar items in EconPapers)
JEL-codes: C90 L13 O31 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2009-03
New Economics Papers: this item is included in nep-com, nep-exp, nep-ino, nep-ipr, nep-pr~, nep-mic and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.zora.uzh.ch/id/eprint/51917/1/wp0905.pdf first version, 2009 (application/pdf)

Related works:
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:soz:wpaper:0905

Access Statistics for this paper

More papers in SOI - Working Papers from Socioeconomic Institute - University of Zurich Contact information at EDIRC.
Bibliographic data for series maintained by Severin Oswald ().