Whither Flat Panel Displays?

42 Pages Posted: 10 Jun 2000 Last revised: 19 Apr 2021

See all articles by Kala Krishna

Kala Krishna

Pennsylvania State University - Department of Economics; National Bureau of Economic Research (NBER)

Marie C. Thursby

Georgia Institute of Technology - Strategic Management Area; National Bureau of Economic Research (NBER)

Date Written: January 1996

Abstract

This paper examines possible consequences of subsidies to R&D and to volume production proposed under the Clinton administration's flat panel display initiative. We do this in the context of a model in which firms behave competitively in the short run, while realizing that their choices of capacity and yield-improving R&D in the medium and long run will affect market price. Policy simulations show that steady state yields and profits are lower, while prices are higher with subsidies for capacity acquisition than with R&D subsidies. This occurs because a firm's incentives to do R&D are diminished by a subsidy on capacity costs.

Suggested Citation

Krishna, Kala and Thursby, Marie C., Whither Flat Panel Displays? (January 1996). NBER Working Paper No. w5415, Available at SSRN: https://ssrn.com/abstract=225475

Kala Krishna (Contact Author)

Pennsylvania State University - Department of Economics ( email )

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Marie C. Thursby

Georgia Institute of Technology - Strategic Management Area ( email )

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National Bureau of Economic Research (NBER)

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