Research and development, voluntary export restriction, tariffs: a comment

In a recent issue of this journal, Bouët (2001) offers a contribution to the literature dealing with the implication of quantitative restrictions in international oligopolies. The main result of the paper is that When the R-D investment has uncertain consequences on marginal cost, a voluntary export restriction (VER) decreases innovation by the domestic producer as compared to the free trade level. This result holds both under Cournot and Bertrand competition (p.323). The aim of the present note is to show that, contrary to the author's claim, the qualitative impact of the VER on R-D investment does depend on the mode of market competition in his model. In order to show this, we provide a counter-example that makes use of the linear example developed by Bouët (2001) and solve it for Bertrand competition (instead of Cournot). In this case, a VER increases R-D expenses (instead of decreasing it under Cournot), i.e. depending on the mode of competition, the implication of the VER on the R-D investment are reversed