Author(s)

Yasunori Ishii

Graduate School of Economics, Waseda University, Shinjuku-ku, Tokyo, Japan.

Modeling an international mixed duopoly composed of a private firm from a capitalist country (CC), and a state firm from a post-communist country (PCC) that choose outputs and product qualities under quality policies of their governments, we analyze the firms’ output-quality rivalry and the governments’ quality policies. We find that when the PCC’s state firm is partially or perfectly privatized, an increase in the quality subsidy of each country raises its firm’s output, product quality and market share, but decreases those of its rival firm, and both the quality policies of the CC and PCC are the subsidy policies. However, when the PCC’s state firm is completely nationalized, while a change in the quality subsidy of the CC has the similar effects as those mentioned above, a change in the quality subsidy of the PCC has no effect on the firms’ outputs, product qualities and market shares, which means that the optimal quality policy of the CC is the subsidy policy, but that of the PCC is to do nothing.

International Mixed Duopoly, Post-Communist Country, Quality Competition, Quality Policy

Ishii, Y. (2018) Product R&D Rivalry and Quality Policy in an International Industry Composed of Firms from Capitalist and Post-Communist Countries. Open Journal of Political Science, 8, 291-304. doi: 10.4236/ojps.2018.83021.