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DTSTAMP:20260901T140147
DTSTART;TZID=America/Detroit:20260918T100000
DTEND;TZID=America/Detroit:20260918T112000
SUMMARY:Workshop / Seminar:Innovation Policy in Product-Line Markets: Evidence from GPUs
DESCRIPTION:I study the effects of innovation policies in product-line markets\, using a dynamic oligopoly model with endogenous pricing\, product-line adjustment\, and R&D. I apply the model to the desktop GPU market\, a duopoly between NVIDIA and AMD. I find that a dollar of R&D generates about $9.0 of within-market surplus net of that dollar\, with the firms capturing $3.0 and consumers the rest. But the return to public support is far more modest. I simulate three stylized interventions: an R&D credit and two product rebates\, one at the cutting edge and one on the mass market. Only the R&D credit induces a material increase in private R&D\, but it returns only $0.51 of surplus per public dollar because additionality is low: most of its outlay reimburses research the firms would have conducted anyway. The rebate on cutting-edge products returns only $0.23 per public dollar and sets back the technology frontier. Subsidizing both firms\, it ignites a price war at the top of the line\, benefiting consumers but undercutting the reason firms advance the frontier. The mass-market rebate sets off the same war lower down the product line but expands adoption enough that R&D survives\, returning $1.09 per public dollar. These results suggest that innovation policy in product-line markets is a more intricate design problem than in markets with simpler structure. Each instrument induces a distinct equilibrium response in prices\, qualities\, and R&D. The static and dynamic components of that response can offset or reinforce each other\, attenuating or even reversing the intended effect.
UID:151329-21911377@events.umich.edu
URL:https://events.umich.edu/event/151329
CLASS:PUBLIC
STATUS:CONFIRMED
CATEGORIES:Economics,Industrial Organization,seminar
LOCATION:North Quad - 4300
CONTACT:
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