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Technology licensing in a vertically differentiated duopoly

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  • Li, Changying
  • Song, Juan

Abstract

In this paper, we develop a vertically differentiated duopoly model where a high-quality producer competes against a low-quality producer, a la Cournot competition. The high-quality firm has both a new technology and an obsolescent technology. After first deciding whether to license, the firm then chooses which of the two technologies to license. We show that, irrespective of the licensing contract, licensing the new technology is always superior to licensing the obsolescent technology. This finding poses a sharp contrast to the conventional wisdom.

Suggested Citation

  • Li, Changying & Song, Juan, 2009. "Technology licensing in a vertically differentiated duopoly," Japan and the World Economy, Elsevier, vol. 21(2), pages 183-190, March.
    • Handle: RePEc:eee:japwor:v:21:y:2009:i:2:p:183-190
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    References listed on IDEAS

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