This paper introduces a new type of R&D subsidy, which is conditional on the success of the R&D project. In a three-stage model, the government chooses a subsidy(ies), a monopolist chooses R&D effort which determines the size or the probability of success of the R&D project, and the firm chooses...

This paper studies the interaction between production subsidies and innovation subsidies. We develop a model which allows us to calculate the socially optimal subsidies (and how they vary with changes in the economic environment), and to understand how firms react to each type of subsidy. In a...

This paper studies the interaction between production subsidies and innovation subsidies. We develop a model which allows us to calculate the socially optimal subsidies (and how they vary with changes in the economic environment), and to understand how firms react to each type of subsidy. In a...