Vertical Integration and Patent Licensing in Upstream and Downstream Markets
AbstractThe present paper studies and compares different vertical integration structures on consumers and total surplus with licensing by mean of a fixed fee in two successive homogeneous-good Cournot duopolies where one of the firms in each market has a different cost-reducing innovation. The key difference between the present model and models in the existing literature is that here we suppose the existence of two different patents in upstream and downstream markets. In each market we find two firms: the patent holding firm and a non innovative firm. In upstream market, the innovative firm owns an innovation allowing to reduce the input marginal production cost. In downstream market the innovative firm owns an innovation allowing to reduce marginal cost of transforming the input into output. We discuss different structures of vertical integration and we show that consumer surplus and total surplus are depending of cost-reducing innovation in upstream and downstream markets and the structure of vertical integration.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 22212.
Date of creation: 03 Jun 2009
Date of revision:
Cournot successive markets; Fee licensing; Vertical integration; process innovation;
Other versions of this item:
- Fehmi Bouguezzi & Moez El Elj, 2010. "Vertical Integration and Patent Licensing in Upstream and Downstream Markets," Journal of Advanced Research in Management, ASERS Publishing, vol. 0(1), pages 4-17, June.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- O32 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Management of Technological Innovation and R&D
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-24 (All new papers)
- NEP-COM-2010-04-24 (Industrial Competition)
- NEP-CSE-2010-04-24 (Economics of Strategic Management)
- NEP-INO-2010-04-24 (Innovation)
- NEP-IPR-2010-04-24 (Intellectual Property Rights)
- NEP-TID-2010-04-24 (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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