The effectiveness of R&D subsidies |
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Authors: | Mayra Rebolledo |
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Affiliation: | Economics Department , University of Alicante , Campus de San Vicente del Raspeig, E-03071 , Alicante , Spain |
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Abstract: | In this paper, the effectiveness of R&D subsidies is analyzed in an oligopolistic model that we apply to the cases of international R&D competition and cooperation. We find that the existence of asymmetric information among firms on whether a rival (or partner) is being subsidized or not may play a key role in explaining whether subsidies are effective or not in increasing R&D investments. In particular, it is shown that if the existence of the subsidy is made public (e.g. because strict information release regulation about R&D subsidies is enforced) and depending on the strategic relationship between the firms’ R&D efforts, an R&D subsidy could even hurt the subsidized firm. |
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Keywords: | R& D subsidies oligopoly asymmetric information strategic complements strategic substitutes |
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