CONDITIONS FOR GOVERNMENT SUPPORT OF PRIVATE RESEARCH-AND-DEVELOPMENT

Based on a model by Joglekar and Hamburg, this article examines the pr oblem of identifying conditions for government support of private reso urce allocation to R&D. The behavioral assumptions of the original mod el are modified in two ways. First, the impact of a matching behavior only with respect to applied research and development on the relation between individually optimal spending and Pareto optimal spending is e xamined. The results are largely the opposite of the findings of Jogle kar and Hamburg for investment in basic research. Second, the assumpti on of a competitive orientation for both kinds of research is integrat ed into the model. The results show the possibility of overinvestment in basic research. This leads to the conclusion that the industry's be havior must be considered very carefully when governmental support ins truments are implemented.