Abstract:Increasing R&D investment in domestic equipment manufacturing industry and introducing foreign products brings R&D spillover, which can improve the technology level of domestic equipment manufacturing industry, but at the same time brings the burden of R&D cost of enterprises and foreign products to seize the domestic market, so the government's R&D subsidies and tariff policy regulation is particularly urgent therein. This paper explores the impact of government R&D subsidies and tariff policies on the market share, profit and R&D level of foreign equipment manufacturers with R&D spillover and sequential game with domestic equipment manufacturers. It further analyzes the optimal decision of the government when the government aims at maximizing social welfare and conducts sensitivity analysis on the key factors. Finally, the robustness of the findings is verified by numerical extensions. It is found that: an increase in either the R&D subsidy coefficient or tariff increases (decreases) the output, profit and R&D level of domestic manufacturers (foreign manufacturers); the total R&D subsidy decreases as the intensity of competition between the two products increases, while the unit R&D subsidy decreases and then increases, and the tariff increases and then decreases, when the government makes the decision with social welfare maximization. The higher the R&D cost factor is, the higher the tariff and unit R&D subsidy will be, but the total R&D subsidy will decrease.