This paper investigates government subsidy games for private sector research and development (R&D) in a two-country two-firm intra-industry trade model. Two funding structures are compared: “cost sharing” vs. “reward for performance.” Both the theoretical evidence and the results of a...

Most industrialized countries subsidize private sector R&D, even under some circumstances when the firm is owned by foreigners. The present paper, using a simple theoretical analysis of a monopoly firm selling only to the U.S. market, argues that such subsidies are welfare enhancing--as long, of...

The Advanced Technology Program (ATP) of the National Institute for Standards and Technology (NIST) subsidizes the R&D expenditure of large single firms at a maximum rate of 40%. The theoretical analysis herein of a monopoly innovator suggests that this subsidy rate is about socially optimal...

Suppose a firm faces a “timing problem” in its capacity decision: it must acquire capacity, a strict upper bound on production, and set its price before quantity demanded for its product is known. The paper shows that the uncertainty capacity is greater than the certainty capacity when the...

The goal of the present paper is to explore the optimal subsidy of R&D by both the foreign and home countries in a model based on Herguera and Lutz (The World Economy, 1998). While they assume the home country subsidy is designed to help the home country "leapfrog" the foreign, we assume...

In a two-country world for a product which in the absence of trade is provided by a monopoly in each country, opening trade effectively creates a world duopoly rather than two separate country monopolies. Suppose the goods produced in the competing countries differ in quality because the firm's...

Consider an industry where a "home" and a "foreign" firm compete on the basis of both price and quality. Further, suppose cost considerations imply that potential market size is positively related to quality. This paper suggests that it is not necessarily the case that both the home and foreign...

Exploited fish and shellfish stocks in European marine waters underlie the Common Fisheries Policy (CFP). The next round of reform of the CFP is due for completion in 2012. The exploitation at maximum sustainable yield (MSY) may be confirmed as the common environmental objective for good...