Working Paper: CEPR ID: DP276
Authors: John Beath; Yannis Katsoulacos; David Ulph
Abstract: The outcome of technological competition between firms (or countries) depends on the resolution of two forces: the profit incentive and the competitive threat. This is illustrated using a simple duopoly model. This model is then used to analyze two policy issues: subsidizing R & D and collaborative research ventures. In evaluating the second of these, some use is made of numerical simulations.
Keywords: innovation; R&D; joint ventures; industrial policy; R&D subsidies
JEL Codes: 621
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| profit incentive (L21) | R&D investment (O32) |
| competitive threat (L19) | R&D investment (O32) |
| R&D investment of rival (O32) | R&D investment of firm (G31) |
| competitive threat > profit incentive (L21) | R&D investment increases (O39) |
| profit incentive > competitive threat (L21) | R&D investment decreases (O39) |
| R&D strategies (O32) | firm profits (L21) |
| Nash equilibrium of innovation game (C72) | balance of profit incentive and competitive threat (L21) |