R&D Output Sharing in a Mixed Duopoly and Incentive Subsidy Policy

This study investigates the incentives for R&D output sharing in a mixed duopoly and shows that public firm chooses full sharing of their R&D output, whereas private firm enjoys free-riding. We then devise an agreement-based incentive R&D subsidy scheme, which can internalize R&D spillovers and induce both firms to earn higher payoffs through full sharing of their R&D output. We also show that an R&D subsidy policy is welfare-superior to a production subsidy policy.