The paper considers a monopoly firm with two possible R&D projects, one improving the product itself and the second reducing the customers' costs associated with product failure. The firm must choose one project or the other, and has a fixed budget for R&D expenditures. A condition on parameters...

Coming out of the global recession, it has been suggested that certain of the United States' trading partners that have relied on exchange rates policy should switch to the industrial policy, particularly, government subsidies for private sector research and development. The present paper argues...

We examine the question of whether a country benefits by subsidizing the Ramp;D of foreign owned monopoly firms. We allow for any proportion of foreign ownership; and, Ramp;D improves the product so that customers directly benefit. The policy implications are: (1) the optimal subsidy increases...