Open AccessInternational Competition In Research And Development; Incentives To Subsidize And Retaliate
Author(s) -
Susan Christoffersen
Publication year - 2011
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v10i4.5914
Subject(s) - subsidy , competition (biology) , competitor analysis , duopoly , economics , incentive , imperfect competition , welfare , order (exchange) , international economics , international trade , microeconomics , market economy , finance , ecology , management , biology
Is laissez faire optimal in international trade under conditions of imperfect competition? Possible economic profits may tempt governments to intervene in trade in order to enhance the national income. An intriguing intervention is subsidizing a firms research and development (R&D) efforts. This paper presents Bertrand competitors, in an international duopoly, who invest in R&D directed towards process innovation. Ironically, a subsidy may not be welfare-enhancing.