Endogenous Timing of R&D Decisions and Privatization Policy with Research Spillovers

Abstract

This study investigates an endogenous R&D timing game between duopoly firms which undertake costreducing R&D investments and then play Cournot output competition. We examine equilibrium outcomes in private and mixed markets and find that spillovers rate critically affects contrasting results.We show that a simultaneous-move appears in a private duopoly only if the spillovers rate is low while a sequential-move appears in a mixed duopoly irrespective of spillovers. We also show that public leadership is the only equilibrium if the spillovers rate is intermediate and its resulting welfare is the highest. Finally, we show that the implementation of privatization policy transforms a public leader to a private competitor, but this can decrease the social welfare.

Effects of partial passive ownership in a successive endogenous timing game with R&D spillovers

“…6 Our findings with lower spillovers and higher spillovers with a lower level of PPO are consistent with previous results in Amir et al (2000), Leal et al (2021), and Lee and Muminov (2021). This implies that R&D spillovers are crucial factors in determining the equilibrium of ETG even in the presence of PPO.…”

“…Note that in the equilibrium outcomes for the whole analysis, we assume (i) 𝑐 ≥ 1 3 to ensure the postinnovation cost is positive (i.e., 𝑐 − 𝑥 𝑖 − 𝛽𝑥 𝑗 > 0) and (ii) 𝑟 = 2 to guarantee interior solutions under the certain ranges of 𝛼 for all 𝛽. Note also that our main findings are robust with 𝑟 = 1 2 or 𝑟 = 1 (Leal et al, 2021;Lee and Muminov, 2021;Lee et al, 2017;and Chen et al, 2022), while corner solutions appear in the analysis. The detailed analysis can be obtained upon request by the authors.…”

“…Moreover, Leal et al (2021) demonstrated that if the R&D spillovers rate is relatively low (high), consumer-friendly firms move simultaneously (sequentially). Finally, contrary to the private market, Lee and Muminov (2021) established that firms in a mixed market always choose R&D investments sequentially, irrespective of the R&D spillovers rate. However, the impact of PPO on the endogenous timing of R&D decisions in the presence of R&D spillovers has received little attention.…”

R&D subsidy and output subsidy in a duopoly: The role of technology spillover and R&D budget

“…Leal et al (2021) discuss the endogenous R&D timing strategies of a consumer-friendly firm and a for-profit firm, both of which undertake cost-reducing R&D investments. Lee and Muminov (2021a) further examine this issue allowing for technology spillovers. Saglam (2023) indicates that the innovator prefers fixed-fee licensing to no licensing with not extremely large cost advantage.…”

Emission taxation, green R&D, and managerial delegation contracts with environmental and sales incentives

“…Recent research on emission taxation discussed the importance of timing in terms of government regulation. SeeLeal et al (2018),Garcia et al (2018),Lee and Muminov (2021),Chen et al (2022), and Xu et al (2022).…”