Quality differentiation and product innovation licensing
Yuxiang Zou and
Economic Modelling, 2020, vol. 87, issue C, 372-382
Evidence reveals that there are more than 50% product innovation licensings applied within industries. We study product innovation licensing (quality-enhancing licensing) in both exclusive and non-exclusive schemes each under unit/revenue royalty and fixed fee in a vertically differentiated Cournot oligopoly, where a quality-leading firm is an internal licensor. We show that, under a non-exclusive licensing, royalty licensing is the superior policy for the licensor if quality difference within firms is small, regardless of whether a unit or revenue royalty scheme is offered. Under an exclusive licensing, a two-part tariff is optimal. If fixed fee licensing is practicable, the licensor favors an exclusive licensing. Furthermore, an increase in quality difference within firms increases the optimal rates. Using the simulated results, we examine that licensing improves social welfare in all schemes, and the number of licensees will influence the magnitude of welfare enhancement.
Keywords: Quality differentiation; Product innovation; Internal licensor; Exclusive/nonexclusive licensing; Unit/revenue royalty (search for similar items in EconPapers)
JEL-codes: D21 D43 D45 L13 L24 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:87:y:2020:i:c:p:372-382
Access Statistics for this article
Economic Modelling is currently edited by S. Hall and P. Pauly
More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().