Table of Contents
Economics Research International
Volume 2014 (2014), Article ID 632176, 5 pages
http://dx.doi.org/10.1155/2014/632176
Research Article

The Government Subsidy Strategy Choice for Firm’s R&D: Input Subsidy or Product Subsidy?

School of Management, University of Science and Technology of China, Hefei 230026, China

Received 28 February 2014; Revised 27 March 2014; Accepted 27 March 2014; Published 15 April 2014

Academic Editor: Udo Broll

Copyright © 2014 Zhiying Liu and Qinqin Li. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

To encourage enterprises to conduct technology innovation, the government needs to formulate appropriate subsidies policy. This paper compares two R&D subsidy policies in a supplier-manufacturer supply chain, in which the manufacturer conducts R&D activity for quality improvement. By means of game theory, we investigate the optimal decisions of the players under the two R&D subsidy policies, that is, input subsidy policy and product subsidy policy. Finally, we compare the profits and welfare to explore the better R&D subsidy policy and provide decision support for government to formulate subsidy policy. The results show that under input subsidy policy the optimal production output, quality improvement, profits, government subsidies, and social welfare are all lower than those of product subsidy policy. Therefore, the government should use product subsidy strategy to encourage enterprise R&D activities.