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Article
R&D Subsidies, Spillovers, and Privatization in Mixed Markets
Southern Economic Journal (2011)
  • Maria Jose Gil-Molto, University of Leicester
  • Joanna Poyago-Theotoky, La Trobe University
  • Vasileios Zikos, University of Surrey
Abstract

We examine the use of subsidies to research and development (R&D) in a mixed and a private duopoly market. We show that the socially optimal R&D subsidy is increasing in the degree of spillovers, but it is lower in the private duopoly. The optimal R&D subsidy leads to an increase in total R&D and production; however, it does not lead to the equalization of per firm output and therefore to an efficient distribution of production costs. We also find that privatization of the public firm reduces R&D activity and welfare in the duopoly market. This result stands even when optimal R&D subsidies are provided.

Keywords
  • R&D subsidies,
  • spillovers,
  • mixed markets,
  • privatization
Publication Date
2011
Citation Information
Maria Jose Gil-Molto, Joanna Poyago-Theotoky and Vasileios Zikos. "R&D Subsidies, Spillovers, and Privatization in Mixed Markets" Southern Economic Journal Vol. 78 Iss. 1 (2011)
Available at: http://works.bepress.com/joanna_poyago_theotoky/30/