In introducing his theoretical analysis of ‘technology policy’, David Ulph observes the potential inconsistency between the objectives of a more competitive post-1992 single European market and government sponsored cooperative ventures aimed at bridging the ‘technology gap’ between European and foreign producers. Gains are posited from a more competitive market environment, together with prospective gains from cooperation in R & D among the same agents who in their product-market guise are to be competitors. Since resources are bounded, government (or the supranational authorities) may be obliged to ‘target’ firms for assistance in R & D joint ventures. Against this background, David Ulph asks: Is a policy goal of ‘technological leadership’ an appropriate welfare objective? And under what circumstances is there a case for government assistance to facilitate cooperation in R & D activities? In turn, if an interventionist role for government can be demonstrated in a particular instance, how can a policy be designed that ensures ‘optimal’ cooperation among firms?

These questions bring us to the heart of ‘technology policy’. In order to seek answers, David Ulph formulates a Cournot-Nash model of an industry wherein firms produce a homogenous product; the industry consists of designated numbers of ‘European’ and ‘Japanese’ firms selling in an integrated (non-segmented) international market. Firms are portrayed as independently choosing their profit-maximising outputs, and as making R & D outlays that reduce costs of production. Technological spillovers are absent – that is, firms can be excluded from the benefits of investments that they did not undertake. All firms confront identical R & D technologies, in the sense of opportunities for investments that will with certainty reduce costs of production.