Innovation, licensing, and price vs. quantity competition
AbstractIn this paper, we develop a differentiated duopoly model with endogenous cost-reducing R&D and review the argument on welfare effect of price and quantity competition in the presence of technology licensing. We show that, with licensing, the standard conclusion on duopoly (Singh and Vives, 1984) is completely reversed. Cournot competition induces lower R&D investment than Bertrand competition does. Moreover, Cournot competition leads to lower prices, lower industry profit, higher consumer surplus and higher social welfare than Bertrand competition.
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Bibliographic InfoArticle provided by Elsevier in its journal Economic Modelling.
Volume (Year): 27 (2010)
Issue (Month): 3 (May)
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Web page: http://www.elsevier.com/locate/inca/30411
Cost-reducing innovation Licensing Cournot competition Bertrand competition Welfare;
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