This paper shows that optimal trade policies for vertically related markets depend crucially on production technology. By employing a production function with variable-coefficient technology, it shows that return to scale is crucial in determining the direction of government intervention. Therefore, the assumption of fixed-coefficient production technologies, which has been popular in industrial organization and trade literature when modeling vertically related markets, should be used with caution. Copyright � 2007 The Authors; Journal compilation � 2007 Blackwell Publishing Ltd.

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This paper studies the patent licensing decision of an insider patentee when two firms engage in a mixed (Cournot-Bertrand or Bertrand-Cournot) competition where one firm adopts the quantity strategy while the other uses the price strategy and vice versa. If either the fixed fee or royalty is applied, then the licensor prefers the fixed fee when the licensor takes the quantity strategy, while the licensee uses the price strategy (Cournot-Bertrand). If the two-part tariff is applied, then the two-part tariff is more likely to be adopted by the licensor under Cournot-Bertrand than under Bertrand-Cournot competition.JEL classification: L13, L22, D43 I . I n t r o d u c t i o nMost of the existing literature on the firm's strategic competition assumes that the firms use the same type of strategy -for example, quantity competition or price competition. Cournot competition is the famous quantity versus quantity competition, while Bertrand competition is the famous price versus price competition. However, in the real business world, it is not necessary for firms in the same industry to use the same type of strategy. If one firm uses the quantity strategy while the other uses the price strategy, then this competition can be called a Cournot-Bertrand mixed competition. 1 Sato (1996) pointed out that in Japan's home electronics market, Matsushita tends to use the quantity strategy, while Sanyo prefers to use the price strategy. Tremblay et al. (2013) noted that in the automobile industry, Saturn and Scion adopt the price strategy, while Honda and Subaru adopt the quantity strategy.In addition to the duopolistic competition with a symmetric competition strategy, Singh and Vives (1984) further analysed mixed competition strategies (Cournot-Bertrand). They allowed a firm to endogenously choose quantity or price to be their own optimal competition strategy. However, since the main purpose of the paper is to examine the effects of mixed competition on patent licensing decision, here the endogenous choice of the optimal competition strategy will not

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