Licensing of a lower-cost production process to an asymmetric Cournot duopoly

Dimitry Rtischev

MPRA Paper from University Library of Munich, Germany

Abstract: An outside inventor of a new production process seeks to license it to Cournot duopolists which have unequal ex ante costs. Distinguishing "leading-edge" innovations (new cost below both firms' costs) from "catch-up" innovations (new cost between the two firms' costs), we compare the equilibria of two license-selling mechanisms: exclusive license auction and non-exclusive price-setting. In contrast to the often-studied case of an innovation that reduces the cost of any licensee by the same amount, we show that licensing of a new process may attenuate the ex ante cost asymmetry, allow the inefficient firm to leapfrog its competitor, and raise the licensee's net profits.

Keywords: cost-reducing innovation; technology licensing (search for similar items in EconPapers)
JEL-codes: D45 L24 O31 (search for similar items in EconPapers)
Date: 2009-01
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Citations: View citations in EconPapers (3)

Published in Gakushuin Economic Papers 4.45(2009): pp. 325-336

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Related works:
Journal Article: Licensing of a lower-cost production process to an asymmetric Cournot duopoly (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:23017

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