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R&D spillovers, output subsidies, and privatization in a mixed duopoly: Flexible versus irreversible R&D investments

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  • Jiaqi Chen
  • Sang‐Ho Lee
  • Timur K. Muminov

Abstract

This study examines firms’ decisions on cost‐reducing research and development (R&D) along with the government's output subsidy policy with research spillovers. We investigate flexible and irreversible R&D, where investment is sequentially chosen after the realization of output subsidy rate in the former and simultaneously chosen with the expectation of subsidy policy in the latter. We demonstrate that compared to irreversible R&D, output subsidy is larger (smaller) for relatively high (low) spillovers, and the welfare is always higher under flexible R&D. We also compare mixed and private duopolies and show that privatization increases (decreases) not only output subsidy but welfare in both cases when the spillovers rate is relatively low (high).

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  • Jiaqi Chen & Sang‐Ho Lee & Timur K. Muminov, 2022. "R&D spillovers, output subsidies, and privatization in a mixed duopoly: Flexible versus irreversible R&D investments," Bulletin of Economic Research, Wiley Blackwell, vol. 74(3), pages 879-899, July.
    • Handle: RePEc:bla:buecrs:v:74:y:2022:i:3:p:879-899
    DOI: 10.1111/boer.12324
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    1. Jiaqi Chen & Sang-ho Lee, 2022. "R&D rivalry with the interaction of output subsidies in an extensive endogenous timing game," Economics Bulletin, AccessEcon, vol. 42(3), pages 1621-1630.
    2. Lili Xu & Yidan Zhang & Sang‐Ho Lee, 2024. "Effects of partial passive ownership in a successive endogenous timing game with R&D spillovers," Bulletin of Economic Research, Wiley Blackwell, vol. 76(1), pages 283-297, January.
    3. Chul‐Hi Park & Sang‐Ho Lee, 2023. "Emission taxation, green R&D, and managerial delegation contracts with environmental and sales incentives," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2366-2377, June.
    4. Xing Gao & Xifan Wang & Weijun Zhong & Ying Wang, 2023. "R&D subsidy and output subsidy in a duopoly: The role of technology spillover and R&D budget," Australian Economic Papers, Wiley Blackwell, vol. 62(3), pages 524-538, September.

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