INVESTMENTS IN PRODUCT QUALITY WITH HETEROGENEOUS FIRMS: THEORY AND EVIDENCE FROM BANGLADESH

This dissertation investigates how competition among heterogeneous firms affects R&D in quality enhancement in a quality-ladder type framework for a Cournot oligopolistic industry. The research also analyzes the welfare implications of various policies that promotes R&D. Some of the theoretical predictions are then tested empirically using firm-level data for Bangladesh from the World Bank's enterprise survey. Chapter 1 shows that a rise in the cost of production of the competitor will induce a firm to invest more in R&D if and only if the quality difference between the existing product and the product emerging from R&D activities is sufficiently large. Also, welfare-reducing effect of helping a `minor' firm is lower in the presence of possible quality differences. Empirical results supports the theoretical findings. Chapter 2 shows that protecting domestic industry of high quality goods encourages firms to invest more in R&D. The size of the optimal tariff depends on the degree of product differentiation and market share of the foreign firms and is not necessarily positive. Chapter 3 shows that a small tariff imposed by the trading partner on the high quality good will deter R&D. However, as the tariff gets bigger, the relationship changes sign. The size of an R&D subsidy depends on the market share of the firms. Empirical results provide support to the theoretical findings.

Name thesis:degree_name

Doctor of Philosophy

Level thesis:degree_level

Campus Only Dissertation

Discipline thesis:degree_discipline

Economics

Year

2012

Author dc:creator

• Ahmed, Kazi Sabbir

Contributors dc:contributor

• Lahiri, Sajal

• Export
• Firm Heterogeneity
• Research and Development
• Subsidy
• Tariff
• Vertical Product Differentiation

Repository record dc:identifier

https://opensiuc.lib.siu.edu/dissertations/535

OAI identifier oai:identifier

oai:opensiuc.lib.siu.edu:dissertations-1536