International Oligopolistic Competition Under The Framework Of The Optimal Strategic R & D Policy Analysis

In this paper, we try to answer: (1) if learning by doing, spillover effects exist in R&D activities, what kinds of incentive components emerge in an optimal strategic R&D policy, and how these components changes with these two dynamic linkage? (2) Is the high R&D subsidies necessary for the development knowledge-intensive infant industry? (3)How to give an explanation for this phenomenon: China government is changing its technology policy from "Market exchanging for know-how" to "technology self-innovation"; (4) How to set an optimal R&D subsidy path for a developing strategic industry?In Chapter 2, we review all the relevant literatures; in Chapter 3, according to the three different assumptions about pre-commitment of government and enterprise, we examines the implications for optimal R&D policies in a two-period (four -stage) Cournot oligopoly game with learning by doing in R&D activities: in FCE, optimal subsidies only come from incentive of rent shifting; in GCE, optimal subsidies have an extra taxation term which offsets the strategic behavior by the home firm; in SE, optimal subsidies further includes another extra taxation term which offsets the strategic behavior by the home firm aimed at manipulating period-2 subsidy. Provided learning by doing in R&D activities is significant, results in SE will possibly weaken the infant-industry argument; In Chapter 4, we symmetrically examine the implications for optimal R&D policies in a two-period (four-stage) Cournot oligopoly game with spillover effects in R&D activities: in FCE, optimal subsidies only come from the trade-off between the incentive of rent shifting and that of spillover and anti-spillover; in GCE, optimal subsidies have an extra subsidy term which offsets the strategic behavior by the home firm; in SE, optimal subsidies further includes another extra subsidy term which offsets the strategic behavior by the home firm aimed at manipulating period-2 subsidy. Provided spillover effect in R&D activities is significant, results in SE will weaken the "Market exchanging for know-how " argument; In chapter 5, under a continuous time framework, we find the difference of subsidy path caused by two dynamic linkage: the higher is the optimal R&D subsidizing path, the stronger is the learning effects in R&D activities; the lower is the optimal R&D subsidizing path, the stronger is the spillover effects in R&D activities. Chapter 6 is our conclusion and the answer to the initial four questions.