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Competition And Welfare: The Implications Of Licensing

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  • ARIJIT MUKHERJEE

Abstract

If firms with asymmetric costs can engage in technology licensing, we show that welfare may be higher under Cournot competition than under Bertrand competition. Under fixed‐fee licensing, consumer surplus and welfare are higher under Cournot competition if the technological difference between the firms is moderate. Under royalty licensing, if the bargaining power of the licenser is not very high and the technological difference between the firms is large, consumer surplus and welfare are higher under Cournot competition. We also show that technology licensing has important implications on the profit differential between Bertrand and Cournot competition.

Suggested Citation

  • Arijit Mukherjee, 2010. "Competition And Welfare: The Implications Of Licensing," Manchester School, University of Manchester, vol. 78(1), pages 20-40, January.
    • Handle: RePEc:bla:manchs:v:78:y:2010:i:1:p:20-40
    DOI: 10.1111/j.1467-9957.2009.02126.x
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    Cited by:

    1. Chang Ray-Yun & Hu Jin-Li & Lin Yan-Shu, 2018. "The Choice of Prices versus Quantities under Outsourcing," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 18(2), pages 1-20, July.
    2. Chang Ray-Yun & Hwang Hong & Peng Cheng-Hau, 2017. "Competition, Product Innovation and Licensing," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(1), pages 1-14, February.
    3. Hong, Xianpei & Zhou, Menghuan & Gong, Yeming, 2021. "Dilemma of quality information disclosure in technology licensing," European Journal of Operational Research, Elsevier, vol. 294(2), pages 543-557.
    4. Stefano Colombo, 2014. "Fee versus royalty licensing in spatial Cournot competition," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(3), pages 859-879, May.
    5. Stefano Colombo & Luigi Filippini, 2015. "Patent Licensing with Bertrand Competitors," Manchester School, University of Manchester, vol. 83(1), pages 1-16, January.
    6. Li, Changying & Ji, Xiaoming, 2010. "Innovation, licensing, and price vs. quantity competition," Economic Modelling, Elsevier, vol. 27(3), pages 746-754, May.
    7. Shin Kishimoto, 2020. "The welfare effect of bargaining power in the licensing of a cost-reducing technology," Journal of Economics, Springer, vol. 129(2), pages 173-193, March.
    8. Tomomichi Mizuno & Kazuhiro Takauchi & Takeshi Iida, 2011. "Better technology may be sold for a lower fee: The ad valorem tariff and licensing contract," Discussion Papers 1109, Graduate School of Economics, Kobe University.
    9. Mukherjee, Arijit & Wang, Leonard F.S. & Sun, Ji, 2024. "Bertrand-Cournot profit reversal in a vertical structure with cross ownership," Economics Letters, Elsevier, vol. 238(C).
    10. Sun, Chia-Hung, 2023. "Timing of technology adoption in the presence of patent licensing," Economic Modelling, Elsevier, vol. 127(C).
    11. Zhao, Dan & Chen, Hongmin & Hong, Xianpei & Liu, Jingfang, 2014. "Technology licensing contracts with network effects," International Journal of Production Economics, Elsevier, vol. 158(C), pages 136-144.

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