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Cooperative R&D and Strategic Trade Policy with Bertrand Competition
Author(s) -
Carlson Julie
Publication year - 2008
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/j.1467-9396.2008.00738.x
Subject(s) - economics , nash equilibrium , microeconomics , bertrand competition , order (exchange) , government (linguistics) , competition (biology) , welfare , strategic interaction , product (mathematics) , product differentiation , game theory , mathematical economics , cournot competition , oligopoly , market economy , finance , ecology , linguistics , philosophy , geometry , mathematics , biology
This paper uses a strategic trade policy model to analyze the welfare effects from allowing cooperation in R&D when firms compete in a price‐setting game in the product market. A policy game between two governments is analyzed, where each government chooses a particular cooperative R&D policy in order to maximize national welfare. At the Nash equilibrium to this game only one government allows cooperation in R&D. This equilibrium is both individually and jointly optimal. International cooperation in R&D is superior to no cooperation in R&D but is inferior to the Nash equilibrium of the government policy game.