5. Conclusion
This paper aims to explore the effects of price undertaking policies on firms' product R&D investments. A duopolistic intra-industry model with differentiated products is employed. We show that the dumping margin is negatively related to product differentiation. Thus, the firms do have different incentives to invest in product R&D with and without price undertaking policies. Under bilateral antidumping actions, the firms will increase or decrease their total product R&D, depending on the tolerable dumping margin set by the governments. This finding is different from that in Gao and Miyagiwa (2005) in which the total cost-reducing R&D is increased by bilateral anti-dumping actions. By contrast, if only one government implements a price undertaking policy, the firm subject to the anti-dumping action will engage in more product R&D, but the protected firm will engage in less. This finding is similar to that in Gao and Miyagiwa (2005), although the causes are very different. Their findings are sensitive to the setup of the trade cost, whereas ours are not. Besides, we have also found that the aggregate R&D definitely decreases under unilateral anti-dumping actions, a finding which has never been corroborated in the literature. In this paper, we have assumed that there is only one firm in each country, and that the firms can only carry out product R&D while the governments implement price undertaking actions. For future studies, one could consider cases in which anti-dumping duties are imposed or in which the firms are able to undertake both product and process R&D. This paper can also be extended to the case with an endogenous market structure. It is hoped that this paper can shed light on this line of research and stimulate further studies.
