Competition, Product Innovation and Licensing

Chang Ray-Yun, Hwang Hong and Cheng-Hau Peng ()
Additional contact information
Chang Ray-Yun: Department of Economics, Chinese Culture University, Taipei, Taiwan
Hwang Hong: Department of Economics, National Taiwan University, Taipei, Taiwan

The B.E. Journal of Economic Analysis & Policy, 2017, vol. 17, issue 1, 14

Abstract: This paper compares market profit and social welfare levels between differentiated Bertrand and Cournot duopoly. We start with a basic model in which a firm with a production technology can license its new technology to a potential rival who can use the technology to produce a differentiated product and compete with the incumbent firm. It is found that for any given technology level, Bertrand competition is necessarily more profitable but less socially desirable, due to its higher royalty rate. By contrast, if the licensee firm is an incumbent firm, the results hold if the technology level is high. Furthermore, if we assume the licensor firm can engage in product innovation and choose its optimal technology endogenously and the R&D efficiency is high (low), the welfare ranking is reversed (still holds).

Keywords: Bertrand versus Cournot competition; licensing; product R&D; welfare (search for similar items in EconPapers)
JEL-codes: D43 D45 L13 L24 (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/bejeap-2016-0136 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:bejeap:v:17:y:2017:i:1:p:14:n:2

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/bejeap/html

DOI: 10.1515/bejeap-2016-0136

Access Statistics for this article

The B.E. Journal of Economic Analysis & Policy is currently edited by Hendrik Jürges and Sandra Ludwig

More articles in The B.E. Journal of Economic Analysis & Policy from De Gruyter
Bibliographic data for series maintained by Peter Golla ().