This paper compares adversarial with cooperative industrial and trade policies in a dynamic oligopoly game in which a home and foreign firm compete in R&D and output and,because of spillovers, each firm benefits from the other's R&D. When the government cancommit to an export subsidy, such a policy raises welfare relative to cooperation, except when R&D is highly effective and spillovers are near-complete. Without commitment, however, subsidisation may yield welfare levels much lower than cooperation and lower even than free trade, though qualifications to the dangers from no commitment are noted.
Ireland ->
University College Dublin ->
Economics Working Papers & Policy Papers
Ireland ->
University College Dublin ->
School of Economics
Ireland ->
University College Dublin ->
College of Social Sciences and Law
Paul O'Sullivan,
J. Peter Neary
