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Technology licensing in a vertically differentiated duopoly

Changying Li () and Juan Song

Japan and the World Economy, 2009, vol. 21, issue 2, 183-190

Abstract: In this paper, we develop a vertically differentiated duopoly model where a high-quality producer competes against a low-quality producer, a la Cournot competition. The high-quality firm has both a new technology and an obsolescent technology. After first deciding whether to license, the firm then chooses which of the two technologies to license. We show that, irrespective of the licensing contract, licensing the new technology is always superior to licensing the obsolescent technology. This finding poses a sharp contrast to the conventional wisdom.

Keywords: Licensing; New; technology; Obsolescent; technology (search for similar items in EconPapers)
Date: 2009
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Handle: RePEc:eee:japwor:v:21:y:2009:i:2:p:183-190