Licensing and R&D Investment of Duopolistic Firms with Partially Complementary Technologies

Tetsuya Shinkai (), Satoru Tanaka and Makoto Okamura
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Satoru Tanaka: Kobe City University of Foreign Studies
Makoto Okamura: Hiroshima University

No 25, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: We consider research and development (R&D) investment competition between duopolistic firms that independently invest in two complementary technologies to produce their products. By "partially complementary technologies", we mean that each firm can produce the goods without both technologies but they incur more redundant costs than with both technologies. We derive the investment competition equilibria in R&D of the two technologies with and without a licensing system. By comparing R&D investment levels in the two equilibria, we show that the licensing system discourages R&D investment in most cases; however, it encourages R&D investment in some cases when the duopolistic firms can produce the goods using both technologies. We also show that (cross-) licensing increases the expected social surplus at the symmetric equilibrium.

Keywords: partially complementary technologies; licensing system; duopoly; R&D investment (search for similar items in EconPapers)
JEL-codes: D45 L13 O32 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2005-03, Revised 2005-03
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http://192.218.163.163/RePEc/pdf/kgdp25.pdf First version, 2005 (application/pdf)

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