Mixed Oligopoly, Privatization and R&D Subsidization

26 Pages Posted: 1 May 2018  

Maria José Gil-Molto

University of Sheffield

Joanna Poyago-Theotoky

La Trobe University; Rimini Center for Economic Analysis

Jose Rodrigues Neto

Australian National University (ANU)

Vasileios Zikos

University of the Thai Chamber of Commerce

Date Written: April 2018

Abstract

We develop a model of a mixed oligopoly to examine the role of R&D subsidies and evaluate the welfare effects of privatization. In solving the (n 1)-firms oligopoly model we make use of aggregative games techniques. Our analysis reveals that privatization reduces the optimal R&D subsidy, but increases aggregate R&D effort. Furthermore, privatization improves social welfare only when the number of firms is sufficiently large. In contrast to an output subsidy, implementing solely a subsidy to R&D does not lead to a ‘privatization neutrality theorem’ or, ‘irrelevance result’.

Keywords: mixed oligopoly, privatization, R&D, R&D subsidies, aggregative games techniques, replacement function

JEL Classification: C72, L13, L32, L33, O38

Suggested Citation

Gil-Molto, Maria José and Poyago-Theotoky, Joanna and Neto, Jose Rodrigues and Zikos, Vasileios, Mixed Oligopoly, Privatization and R&D Subsidization (April 2018). Available at SSRN: https://ssrn.com/abstract=3162021 or http://dx.doi.org/10.2139/ssrn.3162021

Maria José Gil-Molto

University of Sheffield ( email )

17 Mappin Street
Sheffield, Sheffield S1 4DT
United Kingdom

Joanna Poyago-Theotoky (Contact Author)

La Trobe University ( email )

Melbourne, Victoria 3086
Australia

HOME PAGE: http://poyago-theotoky.com

Rimini Center for Economic Analysis ( email )

Via Patara, 3
Rimini (RN), RN 47900
Italy

HOME PAGE: http://poyago-theotoky.com

Jose Rodrigues Neto

Australian National University (ANU)

Canberra, Australian Capital Territory 2601
Australia

Vasileios Zikos

University of the Thai Chamber of Commerce ( email )

126/1 Vibhavadee-Rangsit Road
Dindaeng
Bangkok, 10400
Thailand

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