Product innovation in a vertically differentiated model
We 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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- Morton I. Kamien & Yair Tauman, 1986.
"Fees Versus Royalties and the Private Value of a Patent,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 101(3), pages 471-491.
- Morton I. Kamien & Yair Tauman, 1984. "Fees Versus Royalties and the Private Value of a Patent," Discussion Papers 583, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Michael L. Katz & Carl Shapiro, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 567-589.
- Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, Elsevier.
- Rey, Patrick & Tirole, Jean, 2003. "A Primer on Foreclosure," IDEI Working Papers 203, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2005.
- Sandonis, Joel & Fauli-Oller, Ramon, 2006. "On the competitive effects of vertical integration by a research laboratory," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 715-731, July.
- Sen, Debapriya & Tauman, Yair, 2007. "General licensing schemes for a cost-reducing innovation," Games and Economic Behavior, Elsevier, vol. 59(1), pages 163-186, April.
- Debapriya Sen & Yair Tauman, 2002. "General licensing schemes for a cost-reducing innovation," Department of Economics Working Papers 02-03, Stony Brook University, Department of Economics.
- Can Erutku & Yves Richelle, 2007. "Optimal Licensing Contracts and the Value of a Patent," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 407-436, 06.
- Kamien, Morton I. & Tauman, Yair & Zang, Israel, 1988. "Optimal license fees for a new product," Mathematical Social Sciences, Elsevier, vol. 16(1), pages 77-106, August. Full references (including those not matched with items on IDEAS)
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