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    Strategic R&D Commitment and the Gains from Trade


    Leahy, Dermot (2016) Strategic R&D Commitment and the Gains from Trade. Review of International Economics, 24. pp. 1129-1148. ISSN 0965-7576

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    Abstract

    This paper examines how trade liberalization affects innovation, profits and welfare in a model of reciprocal markets when firms pre-commit to research and development (R&D). We establish that the equilibrium is not always unique and show that, with trade, R&D commitment leads to higher levels of innovation, lower profits, higher consumer surplus and higher welfare than when R&D is chosen simultaneously to output levels. Furthermore, if the effectiveness of R&D is sufficiently high, trade always yields higher welfare than autarky, implying that R&D commitment may significantly enhance the welfare gains from trade liberalization.

    Item Type: Article
    Keywords: Strategic; R&D Commitment; Trade;
    Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
    Item ID: 8455
    Identification Number: https://doi.org/10.1111/roie.12250
    Depositing User: Dermot Leahy
    Date Deposited: 12 Jul 2017 16:42
    Journal or Publication Title: Review of International Economics
    Publisher: Wiley
    Refereed: Yes
    URI:

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