Now showing 1 - 10 of 11
  • Publication
    Public policy towards R&D in oligopolistic industries
    (University College Dublin. School of Economics, 1995-08) ;
    This paper examines the free-market and socially-optimal outcomes in a dynamic oligopoly model with R&D spillovers. First-best optimal subsidies to R&D are higher when firms play strategically against each other, but lower when they cooperate on R&D (at least with high spillovers) and when they play strategically against the government. Second-best optimal subsidies to R&D are presumptively higher than first-best ones, but policies to encourage cooperation are likely to be redundant (since it is always privately profitable) and simulations suggest that the welfare cost of lax competition policy is high.
      650
  • Publication
    Strategic trade and industrial policy towards dynamic oligopolies
    (University College Dublin. School of Economics, 1998-07-21) ;
    We characterize optimal trade and industrial policy in dynamic oligopolistic markets. If governments can commit to future policies, optimal first-period intervention should diverge from the profit-shifting benchmark to an extent which exactly offsets the strategic behaviour implied by Fudenberg and Tirole's "fat cats and top dogs" taxonomy of business strategies. Without government commitment, there is an additional basis for intervention, whose sign depends on the stategic substitutability between future policy and current actions. We consider a variety of applications (to R&D spillovers, consumer switching costs, etc.) and extensions to second-best, revenue-constrained and entry-promotion policies.
      663
  • Publication
    Time-to-build investment and uncertainty in oligopoly
    (University College Dublin. School of Economics, 2002-02) ;
    This paper examines how time to build alters strategic investment behaviour under oligopoly. Facing demand uncertainty, firms decide whether to invest early or wait until uncertainty has been resolved. A game that captures time-to-build investment is contrasted with another one in which investment is quick in place. We show that a time lag between when and how much to invest reduces the incentive to delay. When investment requires time to complete, early investment occurs more to avoid becoming a follower than to become a strategic investment leader. The opposite is true with quick-in-place investment. A brief welfare analysis is provided.
      189
  • Publication
    Export enhancing tariff protection with strategic precommitment
    (University College Dublin. School of Economics, 1994-03)
    The import protection as export promotion thesis is examined from a positive and normative perspective in a series of two-stage games in which firms choose R&D and capacity in the first stage and quantity or price in the second. It is shown (i) that a tariff affects exports in two ways; firstly, with increasing marginal cost it crowds out exports; secondly by increasing R&D and/or capacity it raises exports indirectly, (ii) when firms choose R&D and quantities a small tariff will raise welfare. This result can be reversed under Bertrand competition.
      112
  • Publication
    Symmetric research joint ventures : cooperative substitutes and complements
    (University College Dublin. School of Economics, 2004-05) ;
    We introduce the concept of cooperative substitutes and complements, and use it to throw light on the conditions for a research joint venture to choose equal levels of R&D by all member firms. We show that the second-order conditions for a symmetric optimum take a particularly simple form, ruling out both excessive cooperative substitutability and excessive cooperative complementarity, and nesting conditions already derived in the literature. Finally we explore the implications of our results for the comparison between research joint ventures and a non-cooperative equilibrium.
      414
  • Publication
    Robust rules for industrial policy in open economics
    (University College Dublin. School of Economics, 2001-01-24) ;
    The theory of strategic trade policy yields ambiguous recommendations for assistance to exporting firms in oligopolistic industries. However, some writers have suggested that investment subsidies are a more robust recommendation than export subsidies. We show that, though ambiguous in principle, the case for investment subsidies is reasonably robust in practice. Except when functional forms exhibit arbitrary non-linearities, it holds under both Cournot and Bertrand competition, with either cost-reducing or market-expanding investment, and with or without spillovers. Only if firms have strong asymmetries in their investment behaviour and engage in Bertrand competition is an investment tax clearly justified.
      227
  • Publication
    Learning by doing, precommitment and infant-industry protection
    (University College Dublin. School of Economics, 1994-04-24) ;
    This paper examines the implications for strategic trade policy of different assumptions about precommitment. In a dynamic oligopoly game with learning by doing, the optimal first-period subsidy is lower if firms cannot precommit to future output than if they can; and is lower still if the government cannot precommit to future subsidies. In the linear case the optimal subsidy is increasing in the rate of learning with precommitment, but decreasing in it if the government cannot precommit. The infant-industry argument is thus reversed in the absence of precommitment, which has important implications for economic policy in dynamic environments.
      299
  • Publication
    International R&D rivalry and industrial strategy without government commitment
    (University College Dublin. School of Economics, 1995-05-09) ;
    We examine optimal industrial and trade policies in a series of dynamic oligopoly games in which a home and a foreign firm compete in R&D and output. Alternative assumptions about the timing of moves and the ability of agents to commit intertemporally are considered. We show that the home export subsidy, R&D subsidy and welfare are higher in an equilibrium in which government commitment is credible than in the dynamically consistent equilibrium without commitment. Commitment yields gains but so does unanticipated reneging, whereas reneging which is anticipated by firms yields the lowest welfare of all.
      439
  • Publication
    International R&D rivalry and industrial strategy without government commitment
    (University College Dublin. School of Economics, 1995-08) ;
    We examine optimal industrial and trade policies in a series of dynamic oligopoly games in which a home and a foreign firm compete in R&D and output. Alternative assumptions about the timing of moves and the ability of agents to commit intertemporally are considered. We show that the home export subsidy, R&D subsidy and welfare are higher when government commitment is credible than in the dynamically consistent equilibrium without commitment. Commitment thus yields welfare gains (though they are small) but so does unanticipated reneging, whereas reneging which is anticipated by firms yields the lowest welfare of all.
      368
  • Publication
    Absorptive capacity, R&D spillovers, and public policy
    (University College Dublin. School of Economics, 2004-05) ;
    Empirical evidence strongly suggests that R&D increases a firm’s "absorptive capacity" (its ability to absorb spillovers from other firms) as well as contributing directly to profitability. We explore the theoretical implications of this. We specify a general model of the absorptive capacity process and show that costly absorption both raises the effectiveness of own R&D and lowers the effective spillover coefficient. This weakens the case for encouraging research joint ventures, even if there is complete information sharing between its members. It also implies an additional strategic pay-off to policies that raise the level of extra-industry knowledge.
      415