Licensing under vertical product differentiation: Price vs. quantity competition

Xuan Nguyen, Pasquale Sgro () and Munirul Nabin

Economic Modelling, 2014, vol. 36, issue C, 600-606

Abstract: This paper develops a duopoly model of vertical product differentiation where two domestic firms incur variable costs of quality development. These domestic firms can purchase a superior foreign technology through licensing. Outcomes between Bertrand and Cournot competition are compared. We find that licensing raises domestic welfare, and domestic welfare is higher in Bertrand than in Cournot competition regardless of whether or not domestic firms engage in licensing. Non-exclusive licensing is also found to benefit the domestic country more than exclusive licensing.

Keywords: Bertrand; Cournot; Licensing; Oligopoly; Product differentiation; Welfare (search for similar items in EconPapers)
JEL-codes: L13 L15 O33 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:36:y:2014:i:c:p:600-606

DOI: 10.1016/j.econmod.2013.10.013

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