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Public policy towards R&D in oligopolistic industries

By D. Leahy and J. P. Neary

Abstract

This paper examines the free-market and socially optimal outcomes in a dynamic oligopoly model with R&D spillovers. First-best optimal subsidies to R&D are higher when firms play strategically against each other but lower when they cooperate on R&D (at least with high spillovers) and when they play strategically against the government. Second-best optimal subsidies to R&D are presumptively higher than first-best ones, but policies to encourage cooperation are likely to be redundant (since it is always privately profitable) and simulations suggest that the welfare cost of lax competition is high

Topics: HD Industries. Land use. Labor
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Year: 1995
OAI identifier: oai:eprints.lse.ac.uk:20692
Provided by: LSE Research Online
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