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Licensing a product innovation from an external innovator to a Stackelberg duopoly

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  • Antelo, Manel
  • Bru, Lluís

Abstract

We study the licensing of a product innovation from an external innovator in a duopoly of firms that compete sequentially with each other through quantities or prices. We find that the innovation is only licensed to a single firm, regardless of market competition. However, both the licensee and contractual terms under quantity competition differ from those under price competition. In the first case, the innovation is licensed to the market-leading firm through a non-distorting contract, and in the second case, to the market-following firm by means of a two-part tariff (distorting) contract involving a per-unit royalty.

Suggested Citation

  • Antelo, Manel & Bru, Lluís, 2023. "Licensing a product innovation from an external innovator to a Stackelberg duopoly," MPRA Paper 117542, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:117542
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    References listed on IDEAS

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    1. Fang, Di & Richards, Timothy & Rickard, Bradley, 2015. "Optimal Licensing of Agricultural Patents: Fees Versus Royalties," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(01), pages 1-22.
    2. Francisco Caballero-sanz & Rafael Moner-colonques & Jose Sempere-monerris, 2005. "Licensing policies for a new product," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 14(8), pages 697-713.
    3. Maria Pluvia Zuniga & Dominique Guellec, 2009. "Who Licenses out Patents and Why?: Lessons from a Business Survey," OECD Science, Technology and Industry Working Papers 2009/5, OECD Publishing.
    4. Thompson, Neil C. & Ziedonis, Arvids A. & Mowery, David C., 2018. "University licensing and the flow of scientific knowledge," Research Policy, Elsevier, vol. 47(6), pages 1060-1069.
    5. Zou, Yuxiang & Chen, Tai-Liang, 2020. "Quality differentiation and product innovation licensing," Economic Modelling, Elsevier, vol. 87(C), pages 372-382.
    6. Avagyan, Vardan & Esteban-Bravo, Mercedes & Vidal-Sanz, Jose M., 2014. "Licensing radical product innovations to speed up the diffusion," European Journal of Operational Research, Elsevier, vol. 239(2), pages 542-555.
    7. Stefano Elia & Surender Munjal & Vittoria G. Scalera, 2020. "Sourcing Technological Knowledge Through Foreign Inward Licensing to Boost the Performance of Indian Firms: The Contingent Effects of Internal R&D and Business Group Affiliation," Management International Review, Springer, vol. 60(5), pages 695-721, October.
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    Cited by:

    1. Bakaouka, Elpiniki, 2025. "Royalty licensing in vertically related markets," Economics Letters, Elsevier, vol. 253(C).

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    Keywords

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    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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