Partial privatization and subsidization in a time-consistent policy: output versus R&D subsidies

Lee, Sang-Ho and Muminov, Timur (2020): Partial privatization and subsidization in a time-consistent policy: output versus R&D subsidies.

Abstract

This study revisits welfare comparisons between output and R&D subsidies for a mixed duopoly with partial privatization in a time-consistent policy framework. We show that an output subsidy is welfare-superior to an R&D subsidy policy only when the degree of privatization is high. We also show that the government has a lower incentive to privatize the public firm under the R&D subsidy but full nationalization with an R&D subsidy can decrease the welfare than full privatization with an output subsidy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Partial privatization; R&D subsidy; Output subsidy; Time-consistenct policy
• Subjects: H - Public Economics > H2 - Taxation, Subsidies, and Revenue; L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; L - Industrial Organization > L3 - Nonprofit Organizations and Public Enterprise

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