R&D Subsidies, Spillovers and Privatization in Mixed Markets

Posted: 10 Apr 2011

See all articles by Maria Jose Gil-Molto

Maria Jose Gil-Molto

University of Leicester - Department of Economics

Joanna Poyago-Theotoky

La Trobe University

Vasileios Zikos

Loughborough University - Department of Economics

Date Written: October 1, 2010

Abstract

We examine the use of subsidies to 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 equalisation 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.

Keywords: mixed Duopoly, Process Innovation, R&D Subsidies, Privatization, Spillovers

JEL Classification: L31, L32, O38, L13, L50

Suggested Citation

Gil-Molto, Maria Jose and Poyago-Theotoky, Joanna and Zikos, Vasileios, R&D Subsidies, Spillovers and Privatization in Mixed Markets (October 1, 2010). Southern Economic Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1804688

Maria Jose Gil-Molto

University of Leicester - Department of Economics ( email )

University Road
Leicester, LE1 7RH
United Kingdom

Joanna Poyago-Theotoky (Contact Author)

La Trobe University ( email )

Melbourne, Victoria 3086
Australia

HOME PAGE: http://poyago-theotoky.com

Vasileios Zikos

Loughborough University - Department of Economics ( email )

York House
Loughborough LE11 3TU
Great Britain

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