Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/329943 
Year of Publication: 
2022
Citation: 
[Journal:] Games [ISSN:] 2073-4336 [Volume:] 13 [Issue:] 2 [Article No.:] 32 [Year:] 2022 [Pages:] 1-30
Publisher: 
MDPI, Basel
Abstract: 
In a domestic market, a duopoly produces a homogeneous final good, pollution, pollution abatement, and R&D, which reduces abatement cost. One of the firms (foreign) has superior technology. The government regulates the duopoly by levying a pollution tax to maximize domestic welfare. We consider the potential implementation of three innovation agreements: cooperative research joint venture (RJV), non-cooperative RJV, and licensing. In the cooperative (non-cooperative) RJV, the firms (do not) internalize R&D spillovers. We show that, for the domestic firm, the cooperative RJV dominates, and licensing is the least desirable alternative. Although licensing is dominant for the foreign firm, it is not implementable. Both RJVs are implementable. Implementation of both types of RJVs improves the competitiveness of the domestic firm and welfare. This study yields an important policy prescription: a subsidy policy that induces the foreign firm to accept a feasible cooperative RJV when it strictly prefers a feasible non-cooperative RJV is always welfare improving.
Subjects: 
environmental regulation
innovation
licensing
research joint ventures
JEL: 
D43
D62
L13
L24
L51
Q55
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
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