The effects of uncertainties over R&D policy or market demand on R&D levels | Zendy

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The effects of uncertainties over R&D policy or market demand on R&D levels

Author(s) -

Mai ChaoCheng,

Lin ShihChuan

Publication year - 2021

Publication title -

managerial and decision economics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.288

H-Index - 51

eISSN - 1099-1468

pISSN - 0143-6570

DOI - 10.1002/mde.3291

Subject(s) - rivalry , economics , duopoly , microeconomics , investment (military) , subsidy , product (mathematics) , monetary economics , cournot competition , market economy , geometry , mathematics , politics , political science , law

This paper investigates how product market uncertainty and government research and development (R&D) subsidy uncertainty affect R&D levels in a duopoly with R&D rivalry and technological spillovers from an advanced large firm. Within this framework, one small firm and one large firm compete on R&D and output. We find that if firms' R&D efforts are strategic complements, then the firms' R&D outputs would decrease due to increased uncertainty over R&D policy but would increase due to increased uncertainty over market demand. Thus, we conclude that different types of uncertainties exert different impacts on R&D investment decisions.

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