Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, November 14, 2017

Robust policy schemes for R&D games with asymmetric information

Anton Bondarev and Frank C. Krysiak (University of Basel) offer Robust policy schemes for R&D games with asymmetric information.

ABSTRACT: We consider an abstract setting of the di fferential r&d game, where participating firms are allowed for strategic behavior. We assume the information asymmetry across those fi rms and the government, which seeks to support newer technologies in a socially optimal manner. We develop a general theory of robust subsidies under such one-sided uncertainty and establish results on relative optimality, duration and size of di fferent policy tools available to the government. It turns out that there might exist multiple sets of second-best robust policies, but there always exist a naturally induced ordering across such sets, implying the optimal choice of a policy exists for the government under different uncertainty levels.

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