Munich Personal RePEc Archive

Endogenous Timing of R&D Decisions and Privatization Policy with Research Spillovers

Lee, Sang-Ho and Muminov, Timur (2020): Endogenous Timing of R&D Decisions and Privatization Policy with Research Spillovers.

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Abstract

This study investigates an endogenous R&D timing game between duopoly firms which undertake cost-reducing R&D investments and then play Cournot output competition. We examine equilibrium outcomes in private and mixed markets and find that spillovers rate critically affects contrasting results. We show that a simultaneous-move appears in a private duopoly only if the spillovers rate is low while a sequential-move appears in a mixed duopoly irrespective of spillovers. We also show that public leadership is the only equilibrium if the spillovers rate is intermediate and its resulting welfare is the highest. Finally, we show that the implementation of privatization policy transforms a public leader to a private competitor, but this can decrease the social welfare.

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