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Beat 'em or Join 'em? Export Subsidies versus International Research Joint Ventures in Oligopolistic Markets
Author(s) -
Neary J. Peter,
O'Sullivan Paul
Publication year - 1999
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/1467-9442.00174
Subject(s) - oligopoly , subsidy , commit , economics , welfare , microeconomics , yield (engineering) , government (linguistics) , international economics , monetary economics , international trade , market economy , materials science , database , computer science , metallurgy , linguistics , philosophy
We compare adversarial with cooperative industrial and trade policies in a dynamic oligopoly game in which a home and foreign firm compete in R&D and output and, because of spillovers, each firm benefits from the other's R&D. When the government can commit to an export subsidy, such a policy raises welfare relative to cooperation, except when R&D is highly effective and spillovers are near‐complete. Without commitment, however, subsidisation may yield welfare levels much lower than cooperation and lower even than free trade, though qualifications to the dangers from no commitment are noted. JEL classification: F 12; F 13