Social welfare with a foreign competitor

Ferreira, Fernanda A.

http://hdl.handle.net/10400.22/4388

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Authors

Ferreira, Fernanda A.

Abstract(s)

In this paper, we consider a mixed market in which a state-owned welfare-maximizing public (domestic) firm competes against a profit-maximizing private (foreign) firm. We suppose that the domestic firm is less eflScient than the foreign firm. However, the domestic firm can lower its marginal costs by conducting cost-reducing R&D investment. We examine the impacts of entry of a foreign firm on decisions upon cost-reducing R&D investment by the domestic firm and how these affect the domestic welfare.