Public Policy Towards R&D; in Oligopolistic Industries.
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...Expand abstract
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