The Welfare Effects of Licensing Product-Differentiating Technology in a Commodity Market

H. Phoebe Chan ()
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H. Phoebe Chan: Wheaton College

Review of Industrial Organization, 2022, vol. 60, issue 4, No 1, 510 pages

Abstract: Abstract An innovation that creates horizontal product differentiation is offered to downstream producers that face price competition in a homogeneous commodity market. Innovations can be single-product or multi-product technologies. Adopters of single-product technologies produce identical products, but their products are differentiated from the commodity product. Adopters of multi-product technologies differentiate their products from other adopters and non-adopters. Model results indicate that widespread licensing improves consumer and social welfare; however, the number of licensees that maximizes the patent owner’s profits exceeds the number of licensees that maximizes consumer and social welfare.

Keywords: Bertrand price competition; Horizontal product differentiation; Patent licensing; Welfare (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11151-022-09855-0

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