On intrabrand and interbrand competition: The strategic role of fees and royalties

Kamal Saggi and Nikolaos Vettas

Chapter 30 in Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, 2023, pp 659-670 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We examine oligopolistic markets with both intrabrand and interbrand competition. We characterize equilibrium contracts involving a royalty (or wholesale price) and a fee when each upstream “rm contracts with multiple downstream “rms. Royalties control competition between own downstream “rms at the expense of making them passive against rivals. When the number of downstream “rms is endogenous, each upstream “rm chooses to have only one downstream “rm. This result is in sharp contrast to previous literature where competitors bene”t by having a larger number of independent down-stream “rms under only “xed fee payments. We discuss why allowing upstream “rms to charge per-unit payments in addition to “xed fees dramatically alters their strategic incentives.

Keywords: International Technology Transfer; Multinational Firms; Trips; Foreign Direct Investment; Oligopolistic Competition; Vertical Contracts; Intellectual Property Rights (search for similar items in EconPapers)
JEL-codes: F21 (search for similar items in EconPapers)
Date: 2023
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