Association pour le développement de la recherché en économie et en statistique
Abstract
The effect of trade quotas on firms’ incentive to invest in cost-reducing R&D is studied in a two-stage price-setting duopoly game. A domestic and a foreign firm first choose R&D levels and then set the prices of their differentiated products in the domestic market. With a quota imposed at, or close to, the free-trade level of imports, the domestic firm faces less competition than under free-trade and invests less in R&D. Contrarily, the constrained foreign firm invests more in R&D as the negative strategic effect of a reduction in its cost is now absent. These results differ partially from the Cournot duopoly case in which R&D expenditures are lower for both the firms. As the quota becomes more restrictive, the domestic firm increases and the foreign firm decreases its expenditures on R&D. Domestic welfare is always higher under free-trade than under any quota regardless of the degree of product substitutability.-------------------------------------------------------Dans cet article, une firme nationale et une firme étrangère
choisissent leurs niveaux de R&D dans un premier temps, puis fixent les
prix de leurs produits différenciés sur le marché national. Si le quota
imposé est égal ou est suffisamment proche du niveau des importations
sous libre échange, la firme nationale investit moins en R&D. La firme
étrangère contrainte investit plus, vu que l’effet stratégique négatif de
la réduction des coûts par la R&D disparaît. On montre aussi que le
niveau de bien-être national est toujours plus élevé sous libre échange
indépendamment du degré de substituabilité des produits.Kujal and Petrakis acknowledge support from the DGICYT grant PB95-287
and financial support from the grant Accio´ n Integrada Hispano-Portuguesa 1996,
29 B. Cabral acknowledges financial support from the grant Açôes Integradas Luso-
Espanholas E-63/96.Publicad