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Regulating Innovative Activity: the Role of a Public Firm

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  • F. Delbono
  • V. Denicolo'

Abstract

Without spillovers and under the winner-take-all hypothesis, there is overinvestment in R&D in a non cooperative equilibrium. This is due to the so-called common pool problem , i.e., duplication of efforts. We show that a public firm can represent a useful instrument in the hands of a policymaker to mitigate such a problem. More precisely, it is provided that, in a mixed duopoly: (i) each firm invest less than in a private duopoly, (ii) although the expected time of innovation is postponed, social welfare is higher than in a private duopoly.

Suggested Citation

  • F. Delbono & V. Denicolo', 1991. "Regulating Innovative Activity: the Role of a Public Firm," Working Papers 117, Dipartimento Scienze Economiche, Universita' di Bologna.
    • Handle: RePEc:bol:bodewp:117
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