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Price and quantity competition in an asymmetric duopoly with licensing

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  • Shuai Niu

Abstract

By introducing licensing, this study reconsiders the relative dominance of price‐ and quantity‐setting strategies in an asymmetric duopoly. It shows that if the initial cost difference is small or the goods are close substitutes, then both firms will prefer the quantity strategy. Conversely, for the other cases, heterogeneous‐strategy equilibrium will appear, under which the low‐cost firm will choose a price strategy and the high‐cost firm will choose a quantity strategy. With an endogenous mode of market competition, licensing has always proven to be welfare‐improving.

Suggested Citation

  • Shuai Niu, 2018. "Price and quantity competition in an asymmetric duopoly with licensing," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 20(6), pages 896-913, December.
    • Handle: RePEc:bla:jpbect:v:20:y:2018:i:6:p:896-913
    DOI: 10.1111/jpet.12332
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    Cited by:

    1. Neelanjan Sen & Saumya Kaul & Rajit Biswas, 2021. "Technology licensing under product differentiation," Journal of Economics, Springer, vol. 134(3), pages 219-260, December.
    2. Leonard F. S. Wang & Arijit Mukherjee & Chenhang Zeng, 2020. "Does technology licensing matter for privatization?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1462-1480, September.

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