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Redefining Intra-brand Licensing: Can Vertical Differentiation Transform Patent Strategies?

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  • Saswati Chakraborty

    (Indian Institute of Foreign Trade, Kolkata Campus)

  • Oindrila Dey

    (Indian Institute of Foreign Trade, Kolkata Campus)

Abstract

This paper explores the potential for technology licensing between intra-brand competitors amid inter-brand competition. By integrating the role of vertical differentiation in the framework, we get some contrasting results from the existing literature. We find that when innovation is non-drastic the optimal license contract for a given size of innovation is (i) a royalty alone or a two-part tariff depending on the interval of quality (net of cost) of the superior brand, when the inter-brands are distant to moderate substitutes (ii) a two-part tariff, when inter-brands are moderate to close substitutes. Regardless of the degree of substitution, we find only fixed-fee licensing contract is optimal when the size of innovation is relatively small. Additionally, we also identify the existence of an optimal tariff that can induce technology licensing.

Suggested Citation

  • Saswati Chakraborty & Oindrila Dey, 2025. "Redefining Intra-brand Licensing: Can Vertical Differentiation Transform Patent Strategies?," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 23(3), pages 847-874, September.
    • Handle: RePEc:spr:jqecon:v:23:y:2025:i:3:d:10.1007_s40953-025-00450-0
    DOI: 10.1007/s40953-025-00450-0
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    JEL classification:

    • L - Industrial Organization
    • L - Industrial Organization
    • D - Microeconomics

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