Mixed oligopoly, cost-reducing research and development, and privatisation. (English) Zbl 1441.91043
Summary: We develop a mixed oligopoly model to examine the role of R&D subsidies and evaluate the welfare effects of privatisation. In solving the oligopoly model, we propose a novel use of aggregative games techniques. Our analysis reveals that privatisation reduces the optimal R&D subsidy. Furthermore, privatisation improves social welfare but only when the number of firms is sufficiently large. Implementing solely a subsidy to R&D does not lead to a ‘privatisation neutrality theorem’ or ‘irrelevance result’.
MSC:
| 91B54 | Special types of economic markets (including Cournot, Bertrand) |
| 91B38 | Production theory, theory of the firm |
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