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On intrabrand and interbrand competition: The strategic role of fees and royalties

In: Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy

Author

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  • Kamal Saggi
  • Nikolaos Vettas

Abstract

We examine oligopolistic markets with both intrabrand and interbrand competition. We characterize equilibrium contracts involving a royalty (or wholesale price) and a fee when each upstream “rm contracts with multiple downstream “rms. Royalties control competition between own downstream “rms at the expense of making them passive against rivals. When the number of downstream “rms is endogenous, each upstream “rm chooses to have only one downstream “rm. This result is in sharp contrast to previous literature where competitors bene”t by having a larger number of independent down-stream “rms under only “xed fee payments. We discuss why allowing upstream “rms to charge per-unit payments in addition to “xed fees dramatically alters their strategic incentives.

Suggested Citation

  • Kamal Saggi & Nikolaos Vettas, 2023. "On intrabrand and interbrand competition: The strategic role of fees and royalties," World Scientific Book Chapters, in: Kamal Saggi (ed.), Technology Transfer, Foreign Direct Investment, and the Protection of Intellectual Property in the Global Economy, chapter 30, pages 659-670, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813233027_0030
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    More about this item

    Keywords

    International Technology Transfer; Multinational Firms; Trips; Foreign Direct Investment; Oligopolistic Competition; Vertical Contracts; Intellectual Property Rights;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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