Beat 'em or Join 'em?: Export Subsidies Versus International Research Joint Ventures in Oligopolistic Markets.

This paper is concerned with comparing adversarial with co-operative 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. Because the government cannot commit to an export subsidy, such a policy may reduce welfare relative to free trade. However, except when spillovers are high, free trade may be inferior to strategic trade policy, even if firms are encouraged to engage in cooperative R&D.