Science, technology, and American diplomacy : an extended study of the interactions of science and technology with United States foreign policy / Committee on International Relations, U.S. House of Representatives.

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Science, technology, and American diplomacy : an extended study of the interactions of science and technology with United States foreign policy / Committee on International Relations, U.S. House of Representatives.

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Optimal technology policy: subsidies versus monitoring

We analyze the optimal technology policy to solve a free-riding problem between the members of a RJV. We assume that when intervening the Government suffers an additional adverse selection problem because it is not able to distinguish the value of the potential innovation. Although subsidies and monitoring may be equivalent policy tools to solve firms' free-riding problem, they imply different social losses if the Government is not able to perfectly distinguish the value of the potential innovation. The supremacy of monitoring tools over subsidies is proved to depend on which type of information the Government is able to obtain about firms' R&D performance.