Product innovation in a vertically differentiated model
AbstractWe 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.
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Bibliographic InfoPaper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp833.
Date of creation: Jun 2012
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Find related papers by JEL classification:
- L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-06-25 (All new papers)
- NEP-BEC-2012-06-25 (Business Economics)
- NEP-COM-2012-06-25 (Industrial Competition)
- NEP-IND-2012-06-25 (Industrial Organization)
- NEP-INO-2012-06-25 (Innovation)
- NEP-IPR-2012-06-25 (Intellectual Property Rights)
- NEP-TID-2012-06-25 (Technology & Industrial Dynamics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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"General licensing schemes for a cost-reducing innovation,"
Department of Economics Working Papers
02-03, Stony Brook University, Department of Economics.
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