Munich Personal RePEc Archive

Licensing of a lower-cost production process to an asymmetric Cournot duopoly

Rtischev, Dimitry (2009): Licensing of a lower-cost production process to an asymmetric Cournot duopoly. Published in: Gakushuin Economic Papers , Vol. 45, No. 4 (January 2009): pp. 325-336.

[img]
Preview
PDF
MPRA_paper_23017.pdf

Download (137kB) | Preview

Abstract

An outside inventor of a new production process seeks to license it to Cournot duopolists which have unequal ex ante costs. Distinguishing "leading-edge" innovations (new cost below both firms' costs) from "catch-up" innovations (new cost between the two firms' costs), we compare the equilibria of two license-selling mechanisms: exclusive license auction and non-exclusive price-setting. In contrast to the often-studied case of an innovation that reduces the cost of any licensee by the same amount, we show that licensing of a new process may attenuate the ex ante cost asymmetry, allow the inefficient firm to leapfrog its competitor, and raise the licensee's net profits.

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.