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Pré-Publication, Document De Travail Année : 2016

Vertical Differentiation, Uncertainty, Product R&D and Policy Instruments in a North-South Duopoly

Résumé

This paper analyzes the impact of several trade policy instruments on product Research and Development (R&D) investment in a North-South duopoly where a Northern firm competes in prices with a Southern firm on both markets. The Northern firm invests in product R&D owing to a competitive disadvantage compared to the Southern firm which benefits from a lower labor cost. The outcome of the R&D activity is uncertain. If successful, vertical differentiation occurs in both markets. The Northern country’s government is the only one policy active and may implement the following trade policy instruments: an import tariff, a production subsidy, an R&D subsidy, a standard of quality, a minimum-price, and an import quota. The results show that the Northern firm’s R&D expenditures increase with each policy instrument except for the import quota. The paper also provides a welfare analysis in order to verify whether or not the Northern government is encouraged to implement these policy instruments.
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Dates et versions

hal-01285559 , version 1 (09-03-2016)

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  • HAL Id : hal-01285559 , version 1

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Julien Berthoumieu, Viola Lamani. Vertical Differentiation, Uncertainty, Product R&D and Policy Instruments in a North-South Duopoly. 2016. ⟨hal-01285559⟩
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