R&D subsidies under asymmetric duopoly: A note

This paper analyses the question of optimum R&D subsidies in the context of a two-stage asymmetric Cournot duopoly model with endogenous R&D. For the special case of symmetric duopoly, whether the firms should be subsidized o r taxed in their R&D activities crucially depends on the concavity/convexit y property of the demand function. It is also shown that a firm with some i nitial cost advantage should be subsidized in its R&D activities and a firm without should be taxed. In this way, we obtain policy implications that c ast doubts on the universal applicability of competition policies. JEL Clas sification Numbers: L13, L52, H25.