Role of Government Support on R&D in Development of Exporting Industries in International Duopoly Markets

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BRUMAND YOUNES; SHAHBAZI KIUMARS

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Journal: Journal of Economic Research and Policies Year:2019 | Volume:26 | Issue:88 Page(s): 177-208

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Information Journal Paper

Title

Role of Government Support on R&D in Development of Exporting Industries in International Duopoly Markets

Author(s)

BRUMAND YOUNES | SHAHBAZI KIUMARS | Issue Writer Certificate

Keywords

R&D SubsidyQ1

Strategic Trade Policy Subgame Perfect EquilibriumQ1

Abstract

In strategic trade policy, governments support their domestic firms in many ways in order to promote their performance in the international field. One of these ways is R&D subsidies. In this paper, the strategic interaction among two governments and two firms which exporting homogenous commodities to the global market is analyzed using the game theory. The interaction is analyzed in a two-stage dynamic game with complete but imperfect information setting, which in the first stage, governments decide about granting or not granting the subsidies to their domestic firms, and in the second stage, firms decide whether allocate resources to R&D or not. The unique subgame perfect equilibrium of the game indicates that governments support their domestic firms and firms allocate some resources to the R&D process. Although this outcome may result in the prisoner's dilemma for governments in developed countries, it is an optimal solution for developing countries such as Iran. The equilibrium is also consistent with the general policies of the resistive economy.

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APA: Copy

BRUMAND, YOUNES, & SHAHBAZI, KIUMARS. (2019). Role of Government Support on R&D in Development of Exporting Industries in International Duopoly Markets. JOURNAL OF ECONOMIC RESEARCH AND POLICIES, 26(88 ), 177-208. SID. https://sid.ir/paper/360207/en

Vancouver: Copy

BRUMAND YOUNES, SHAHBAZI KIUMARS. Role of Government Support on R&D in Development of Exporting Industries in International Duopoly Markets. JOURNAL OF ECONOMIC RESEARCH AND POLICIES[Internet]. 2019;26(88 ):177-208. Available from: https://sid.ir/paper/360207/en

IEEE: Copy

YOUNES BRUMAND, and KIUMARS SHAHBAZI, “Role of Government Support on R&D in Development of Exporting Industries in International Duopoly Markets,” JOURNAL OF ECONOMIC RESEARCH AND POLICIES, vol. 26, no. 88 , pp. 177–208, 2019, [Online]. Available: https://sid.ir/paper/360207/en

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