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The Sensitivity of Strategic and Corrective R and D Policy in Battles for Monopoly

Kyle Bagwell and Robert W. Staiger
International Economic Review
Vol. 33, No. 4 (Nov., 1992), pp. 795-816
DOI: 10.2307/2527143
Stable URL: http://www.jstor.org/stable/2527143
Page Count: 22
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
The Sensitivity of Strategic and Corrective R and D Policy in Battles for Monopoly
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Abstract

We characterize the role for R & D subsidies in export markets where R & D is an uncertain process and the winner of the R & D competition monopolizes the market. Investments are assumed to induce either first order or mean-preserving second order shifts in the distribution of a firm's costs or, reinterpreting the model as a patent race, a firm's discovery dates. We show that, regardless of which form the uncertainty takes, a national strategic incentive to subsidize R & D exists, but must be balanced against a national corrective incentive to tax R & D whenever a country has multiple firms involved in the R & D competition.

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