Competitiveness and Subsidy or Tax Policy for New Technology Adoption in Duopoly

Abstract

We consider a problem of subsidy or tax policy for new technology adoption by duopolistic firms. The technology is developed in and transferred by a foreign country to the domestic country. It is free but each firm must expend some fixed set-up cost for education of its staff to adopt and use it. Assuming that each firm maximizes the weighted average of absolute and relative profits, we examine the relationship between competitiveness and subsidy or tax policies for technology adoption, and show that when firm behavior is not competitive (the weight on the relative profit is small), the optimal policy of the government may be taxation; when firm behavior is competitive (the weight on the relative profit is large), the optimal policy is subsidization or inaction and not taxation. However, if firm behavior is extremely competitive (close to perfect competition), taxation case re-emerges.

The welfare effect of release timing of relative performance evaluation under quantity competition and asymmetric costs

“…Following Aggarwal and Samwick (1999) and Fumas (1992), previous studies have considered the impact of RPEs on firm strategies or social welfare based on a managerial delegation game (e.g., Asseburg & Hofmann, 2010; Chirco et al., 2011; Hamamura & Ramani, 2023; Hattori & Tanaka, 2016; Huang et al., 2020; Matsumura et al., 2013; Miller & Pazgal, 2005; Satoh & Tanaka, 2014; Tanaka, 2014; Wu, 2012; Xu & Matsumura, 2022).…”

“…(2011) examines the relationship between the number of firms in a product market and social welfare, and they demonstrate that social welfare is non‐monotone in the number of firms. Hattori and Tanaka (2016) considers whether adopting new technology improves social welfare under any strategic relationships. Matsumura et al.…”

“…Chirco et al (2011) examines the relationship between the number of firms in a product market and social welfare, and they demonstrate that social welfare is non-monotone in the number of firms. Hattori and Tanaka (2016) considers whether adopting new technology improves social welfare under any strategic relationships. Matsumura et al (2013) analyzes the impact of RPEs on the cost-reducing R&D, and they consider the optimal (second-best) level of investment for social welfare under RPEs.…”

Social performance versus relative performance evaluation, asymmetric costs, and quantity competition under managerial delegation

“…Following Aggarwal and Samwick (1999) and Fumas (1992), several studies consider the impact of RPEs on firm strategies based on the managerial delegation game (e.g., Asseburg & Hofmann, 2010;Chirco et al, 2011;Hattori & Tanaka, 2016;Huang et al, 2020;Matsumura et al, 2013;Miller & Pazgal, 2005;Satoh & Tanaka, 2014;Tanaka, 2014;Xu & Matsumura, 2022). In particular, several studies assume asymmetric marginal costs among competing firms (Hamamura, 2021a(Hamamura, , 2021b(Hamamura, , 2022 and focus on the weight placed on the rival's profit.…”

Strategic management of patents on electrochemical conversion fuel cells and batteries in Latin America as a mechanism for moving towards energy sustainability

“…Given that most LATAM countries are at an early stage of technological adoption, it is necessary to formulate strategies in three directions: the first, the development of applied research with challenges related to these technologies; the second, the subsidized adoption of technologies in this sector [84,85] in order to advance the promotion of the best inventions and consequently the development of these industrial activities; and the third, to design and implement restrictive or incentive legislations focused on the automotive industry and its battery suppliers, also considering mining companies and future H 2 suppliers, due to their importance in the automotive manufacturing value chain, as well as their great financial capacity.…”