R&D Subsidies,Spillovers, and Privatization in Mixed Markets |
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| Authors: | Maria José Gil-Moltó Joanna Poyago-Theotoky Vasileios Zikos |
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| Institution: | 1. Department of Economics, University of Leicester, Leicester LE1 7RH, England, UK;2. School of Economics and Finance, La Trobe University, Melbourne, Victoria 3086, Australia and Fellow of CRIEFF (University of St Andrews) and the Rimini Centre for Economic Analysis:;3. Department of Economics, University of Surrey, Guildford, Surrey, GU2 7XH, United Kingdom and School of Economics, University of the Thai Chamber of Commerce, 126/1 Vibhavadee-Rangsit Road, Dindaeng, Bangkok, 10400, Thailand |
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| Abstract: | We examine the use of subsidies to research and development (R&D) in a mixed and a private duopoly market. We show that the socially optimal R&D subsidy is increasing in the degree of spillovers, but it is lower in the private duopoly. The optimal R&D subsidy leads to an increase in total R&D and production; however, it does not lead to the equalization of per firm output and therefore to an efficient distribution of production costs. We also find that privatization of the public firm reduces R&D activity and welfare in the duopoly market. This result stands even when optimal R&D subsidies are provided. |
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| Keywords: | L31 L32 O38 L13 L50 |
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