International R&D Rivalry and Industrial Strategy

36 Pages Posted: 8 Jun 2004 Last revised: 6 Oct 2022

See all articles by Barbara J. Spencer

Barbara J. Spencer

University of British Columbia (UBC) - Sauder School of Business; National Bureau of Economic Research (NBER)

James A. Brander

University of British Columbia (UBC) - Sauder School of Business

Date Written: August 1983

Abstract

This paper presents a theory of government intervention which provides an explanation for "industrial strategy" policies such as R&D or export subsidies in imperfectly competitive international markets. Each producing country has an incentive to try to capture a greater share of rent-earning industries using subsidies, but the subsidy-ridden international equilibrium is jointly suboptimal. The equilibrium in the strategic game involving firms and governments is modelled as a three stage subgame perfect Nash equilibrium. The assumption that the government is the first player in this game allows it to influence equilibrium industry outcomes by altering the set of credible actions open to firms.

Suggested Citation

Spencer, Barbara J. and Brander, James A., International R&D Rivalry and Industrial Strategy (August 1983). NBER Working Paper No. w1192, Available at SSRN: https://ssrn.com/abstract=305572

Barbara J. Spencer (Contact Author)

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James A. Brander

University of British Columbia (UBC) - Sauder School of Business ( email )

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