NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Whither Flat Panel Displays?

Kala Krishna, Marie Thursby

NBER Working Paper No. 5415
Issued in January 1996
NBER Program(s):International Trade and Investment

This paper examines possible consequences of subsidies to R&D and to volume production proposed under the Clinton administration's flat panel display initiative. We do this in the context of a model in which firms behave competitively in the short run, while realizing that their choices of capacity and yield-improving R&D in the medium and long run will affect market price. Policy simulations show that steady state yields and profits are lower, while prices are higher with subsidies for capacity acquisition than with R&D subsidies. This occurs because a firm's incentives to do R&D are diminished by a subsidy on capacity costs.

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Document Object Identifier (DOI): 10.3386/w5415

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