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Estimating the Impact of a Potential Process Innovation and the Optimal Strategy of Licensing

  • Weifang Lou

    ()

    (School of Economics, La Trobe University)

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    This paper explores the implication of a potential quality-improving innovation through its application to digital camera market. It simulates post-innovation prices and sales of cameras and quantitatively estimates the economic impacts of the innovation based on a random coefficient structural model and existing market data. The results show that the potential gain to producers and consumers from the new technology varies substantially depending on the superiority of the technology and the composition of the adopters. The inventor of the innovation benefit more by licensing it to a larger camera maker and profits increase in the number of adopted camera makers.

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    File URL: http://www.latrobe.edu.au/__data/assets/pdf_file/0020/130916/2009.03.pdf
    File Function: First version, 2009.03.pdf
    Download Restriction: no

    Paper provided by School of Economics, La Trobe University in its series Working Papers with number 2009.03.

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    Length: 53 pages
    Date of creation: Oct 2009
    Date of revision:
    Handle: RePEc:trb:wpaper:2009.03
    Contact details of provider: Web page: http://www.latrobe.edu.au/economics

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    1. Hernandez-Murillo, Ruben & Llobet, Gerard, 2006. "Patent licensing revisited: Heterogeneous firms and product differentiation," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 149-175, January.
    2. Sougata Poddar & Uday Bhanu Sinha, 2002. "On Patent Licensing in Spatial Competition," Departmental Working Papers wp0212, National University of Singapore, Department of Economics.
    3. Juan Esteban Carranza, 2010. "Product Innovation and Adoption in Market Equilibrium: The Case of Digital Cameras," BORRADORES DE ECONOMÍA Y FINANZAS 007127, UNIVERSIDAD ICESI.
    4. Tarun Kabiraj, 2005. "Technology Transfer In A Stackelberg Structure: Licensing Contracts And Welfare," Manchester School, University of Manchester, vol. 73(1), pages 1-28, 01.
    5. Daniel A. Ackerberg & Marc Rysman, 2002. "Unobserved Product Differentiation in Discrete Choice Models: Estimating Price Elasticities and Welfare Effects," NBER Working Papers 8798, National Bureau of Economic Research, Inc.
    6. Ackerberg, Daniel & Lanier Benkard, C. & Berry, Steven & Pakes, Ariel, 2007. "Econometric Tools for Analyzing Market Outcomes," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 63 Elsevier.
    7. Junji Xiao, 2008. "Technological advances in digital cameras: Welfare analysis on easy-to-use characteristics," Marketing Letters, Springer, vol. 19(2), pages 171-181, June.
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