Dewit, Gerda and Leahy, Dermot (2015) R&D Commitment and the Gains from Trade. Working Paper. National University of Ireland Maynooth. (Unpublished)

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Abstract

Abstract: This paper examines how trade liberalisation affects innovation, profits and welfare in a reciprocal markets model when firms pre-commit to R&D investment. First, we show that, for a range of trade costs, there are multiple equilibria, implying that the path of trade liberalisation is not unique. Second, welfare at “incipient” trade always exceeds welfare in autarky. Third, we show that, if the effectiveness of R&D is sufficiently high, trade always yields higher welfare than autarky. These new results suggests that when firms, operating in an oligopolistic environment, strategically precommit to R&D, the welfare gains from trade liberalisation are enhanced.

Item Type:	Monograph (Working Paper)
Additional Information:	This WP N257-14 is a revised version of: Dewit, Gerda and Leahy , Dermot (2011) Strategic Investment and the Gains from Trade (N216-11).
Keywords:	Reciprocal Markets; Strategic R&D Investment; Trade Costs; Trade; Liberalisation; Effectiveness of R&D;
Academic Unit:	Faculty of Social Sciences > Economics, Finance and Accounting
Item ID:	5687
Depositing User:	Ms Sandra Doherty
Date Deposited:	19 Jan 2015 10:25
Publisher:	National University of Ireland Maynooth
URI:
Use Licence:	This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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