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Competitiveness of Firm Behavior and Public Policy for New Technology Adoption in an Oligopoly

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  • Masahiko Hattori

    (Doshisha University)

  • Yasuhito Tanaka

    (Doshisha University)

Abstract

Economic growth requires that firms adopt new technologies. However, it may be insufficient or excessive in less competitive industries from the social welfare point of view. In this case, a government subsidy or tax is necessary. We analyze the optimum subsidy or tax policy for new technology adoption by firms when firms maximize the weighted average of absolute and relative profits. We do not consider that firms really maximize the weighted average, but the weight on the relative profit is used as a parameter indicating competitiveness of firm behavior. We show that the optimum policy is likely to be subsidization (or taxation) when the set-up cost for new technology adoption is large (or small). It is likely to be subsidization (or taxation) when competitiveness is large (or small), that is, it is near to perfect competition (or joint profit maximization).

Suggested Citation

  • Masahiko Hattori & Yasuhito Tanaka, 2017. "Competitiveness of Firm Behavior and Public Policy for New Technology Adoption in an Oligopoly," Journal of Industry, Competition and Trade, Springer, vol. 17(2), pages 135-151, June.
    • Handle: RePEc:kap:jincot:v:17:y:2017:i:2:d:10.1007_s10842-016-0231-2
    DOI: 10.1007/s10842-016-0231-2
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    2. Carroni, Elias & Delogu, Marco & Pulina, Giuseppe, 2023. "Technology adoption and specialized labor," International Economics, Elsevier, vol. 173(C), pages 249-259.

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    More about this item

    Keywords

    Competitiveness; Subsidy or tax policy; New technology adoption; Oligopoly;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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