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Product innovation in a vertically differentiated model

Luigi Filippini () and Cecilia Vergari ()

Working Papers from Dipartimento Scienze Economiche, Universita' di Bologna

Abstract: We study the licensing incentives of an independent input producer owning a patented product innovation which allows the downstream firms to improve the quality of their final goods. We consider a general two-part tariff contract for both outside and incumbent innovators. We find that technology diffusion critically depends on the nature of market competition (Cournot vs. Bertrand). Moreover, the vertical merger with either downstream firm is always privately profitable and it is welfare improving for large innovations: this implies that not all profitable mergers should be rejected.

JEL-codes: L15 L13 L24 (search for similar items in EconPapers)
Date: 2012-06
New Economics Papers: this item is included in nep-bec, nep-com, nep-ind, nep-ino, nep-ipr, nep-pr~ and nep-tid
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Persistent link: https://EconPapers.repec.org/RePEc:bol:bodewp:wp833

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