Abstract The article presents a discussion of income tax subsidies and research and development spending in a competitive economy. The study by researchers J.H. Davis, C. Quirmbach and C.W. Swenson of the influence of tax subsidies on research expenditures is a fine example. The experiment is well conducted and it adheres carefully to the generally accepted tenets of the methodology. Any productive area of research, however, needs to be continually challenged in order to avoid complacency. In the discussion, the author provides such a challenge and suggests some new frontiers. The frontier that the author believes is most needful of investigation especially in the tax domain is the use of experimentation to contrast predictions based on strategic wealth-maximizing incentives against competing predictions drawn from cognitive or other alternative theories. The author begins by summarizing what he believes may be the eventual limitation of the typical motivation for an experimental economics study of taxpayer behavior. This is followed by three specific suggestions for addressing the limitation: comparing alternative decision frames while holding economic incentives constant; examining the trade off between monetary and nonmonetary incentives; and examining the conflict between competitive and cooperative behavior.
Steven J. Kachelmeir (Sat,) studied this question.