| This paper studies optimal tariffs and R&D policies under Oligopoly. From the perspective of imports, we compare optimum welfare tariff with maximum revenue tariff. As far as exports are concerned, we discuss a country's R&D policies.In terms of optimal tariffs, the paper first compares optimum welfare tariff with maximum revenue tariff under Stackelberg Duopoly. It is shown that whether optimum welfare tariff is larger than maximum revenue tariff or not depends on the relations between products and the efficiency of domestic firm. Specifically, when the products are complements, optimum welfare tariff is always lower than maximum revenue tariff. When the products are substitutes, it is more likely that optimum welfare tariff is larger than maximum revenue tariff if the degree of product differentiation is lower and the domestic is more efficient.By using a model where a domestic firm competes against a foreign firm with different product qualities, we compare optimum welfare tariff with maximum revenue tariff. It is shown that when the foreign firm is a high-quality producer, if it is relatively efficient (inefficient), maximum revenue tariff is larger (smaller) than optimum welfare tariff irrespective of the competition mode. Moreover, optimum welfare tariff and maximum revenue tariff are higher under Cournot than under Bertrand competition.As for R&D policies, the paper studies three facets by using Spencer and Brander (1983) for the third-nation market competition model.Firstly, it investigates how firm's R & D efficiency and product quality differences affect a country's R & D policies when a country hosts one firm while another country hosts two firms, and two countries respectively host two firms. In view of R&D efficiency, the country which hosts only one firm will always subsidize R&D. When another country also take R&D policies, the country which hosts two firms take subsidization, non-interference and tax when the firm's R&D efficiency is getting low if another country hosts only one firm, and subsidize (tax) R&D when the firm's R&D efficiency is higher (lower) if another country hosts two firms also.With regard to product qualities, we discuss a country's R&D policies in three cases. The first case is one country hosts a firm which produces high quality products and another country hosts two firms which produce low quality products. The second case is a country hosts two firms that produce high quality products and another country hosts one firm that produces low quality products. The third case is one country hosts two firm that produce high quality product and another country hosts two firms that produce low quality product. The results show that when two countries may both take R&D policies, whatever quality the products are of, the country which hosts only one firm always subsidizes R&D. The country which hosts two firms will tax (won't intervene) R&D when the difference of product quality is large (small) if another country hosts only one firm, and will subsidize (tax) R&D when the difference of product quality is smallest (largest) if another country hosts two firms. When anther country also hosts two countries, the country hosting two firms that produce high (low) quality product will subsidize (won't intervene) R&D when the difference of product quality is smaller, and that produce low (high) quality product will tax (won't intervene) R&D when the difference of product quality is larger.Secondly, by using a duopoly model we analyze the controlled country's R&D policies from the view of product difference when it lies in vertical control where an un-integrated domestic firm purchases a key intermediate product from a integrated foreign firm. Whether the type of difference of product is horizontal or vertical, the optimal policy is taxing (subsiding) on R&D in the setting of Cournot competition when the degree of product differentiation is larger (lower), and the optimal policy is always taxing on R&D in the setting of Bertrand competition regardless of the product difference.Finally, we analyze the optimal R&D policies of a country in intermediate products trade. On one hand, we mainly discuss the R&D policies when one country hosts one firm while another country hosts two firms and both country host two firms. After we research the R&D policies from horizontal market structure and product difference, we find that if both countries have two firms whatever the competition mode is, each country tax (subsidize) R&D when the product difference is larger (smaller). Whether each country taxes, doesn't intervene or subsidizes R&D depends on the degree of product difference when both countries may take R&D policies if one country hosts one firm and another country hosts two firms.On the other hand, in terms of firms entering market's sequence, we mainly discuss the case in which both countries host one firm that produces the final product. The country subsidizes (taxes) when the degree of product difference is larger (smaller) if only one country may take R&D policies. Whether each country taxes, doesn't intervene or subsidizes R&D depending on the degree of product difference if both countries may take R&D policies. |
PDF Full Text Request