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Mixed ownership and R&D under discriminatory output subsidies

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  • Chen, Jiaqi
  • Lee, Sang-Ho
  • Muminov, Timur

Abstract

This study considers a (partially privatized) semi-public firm in a mixed duopoly and examines the welfare effects of discriminatory output subsidies under R&D competition. We find that the government grants higher subsidies to the private firm than to the semi-public firm, which induces the private firm to invest more in R&D and to produce a higher output than the semi-public firm. We also show that optimal subsidy rates are higher (lower) than uniform subsidy rates for a sufficiently high (low) degree of privatization, which could decrease (increase) social welfare. This finding sharply contrasts to the case that the committed discriminatory output subsidy always yields the highest welfare compared to non-committed cases.

Suggested Citation

  • Chen, Jiaqi & Lee, Sang-Ho & Muminov, Timur, 2020. "Mixed ownership and R&D under discriminatory output subsidies," MPRA Paper 105015, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:105015
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    References listed on IDEAS

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    Cited by:

    1. Jiaqi Chen & Doori Kim & Sang‐Ho Lee, 2024. "Endogenous timing of R&D decisions with spillovers: Output versus research subsidies," Bulletin of Economic Research, Wiley Blackwell, vol. 76(3), pages 631-649, July.

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    More about this item

    Keywords

    mixed ownership; time-consistency; discriminatory output subsidies; R&D competition;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise

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