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| Youping Li, Cristina M. Reiser and Zhou Yang |
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| ''Inducing R&D investment with price ceilings'' |
| ( 2010, Vol. 30 No.2 ) |
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| Though government intervention is prevalent in the market for research and development (R&D), most literature has focused on the use of subsidies, patents or joint research ventures to obtain the efficient R&D investment. By using a two-stage duopoly model in which firms first choose the level of investment and then output, our paper shows that the introduction of a price ceiling by the regulator will result in the optimal level of R&D. This interesting but counterintuitive result contrasts with the existing literature and advances our understanding about price ceilings. |
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| Keywords: Research and development; Subsidy; Price ceiling |
JEL: D2 - Production and Organizations: General
D4 - Market Structure and Pricing: General |
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| Manuscript Received : Apr 12 2010 | | Manuscript Accepted : May 26 2010 |
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