Technology licensing in a vertically differentiated duopoly

Li, Changying; Song, Juan

doi:10.1016/j.japwor.2008.04.002

Cited by 36 publications

(38 citation statements)

References 21 publications

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“…Moreover, this product licensing is necessarily detrimental to consumers if the quality difference between the two firms is small. These findings are in sharp contrast to the finding in Li and Song (2009).…”

Section: Introductioncontrasting

confidence: 99%

“…2 However, to the best of our knowledge, only a few papers in the literature have tackled technology licensing regarding product innovation. Li and Song (2009) employ a vertically differentiated product model à la Motta (1993) with zero production costs to find that the optimal form of contract is royalty licensing and that such licensing necessarily increases the consumer's surplus and social welfare. 3 In this paper, we assume away the zero production cost assumption and find that royalty licensing is inferior to fixed licensing if the cost advantage of the licensee firm is large.…”

Section: Introductionmentioning

confidence: 99%

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Cost asymmetry and vertical product licensing

Chang

Peng

2013

Asia-Pacific Journal of Accounting & Economics

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This paper investigates the optimal licensing contract for a product innovation in a vertically differentiated duopoly. The two firms have different marginal costs and the high-quality firm can license its technology on product quality to the low-quality firm. It is found that the optimal form of licensing contract depends on the relative marginal costs of the two firms. If the marginal cost of the high-quality firm is relatively high (low), fixed-fee licensing is superior (inferior) to royalty licensing from the viewpoint of the licensor. Surprisingly, consumers are worse off if the quality difference between the two firms is small. This result is in contrast to the received wisdom in the product licensing literature.

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Section: Introductioncontrasting

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Cost asymmetry and vertical product licensing

Chang

Peng

2013

Asia-Pacific Journal of Accounting & Economics

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“…Many established articles on technology licensing focus on cost-reducing technology innovation [9][10][11][12][13][14] There is a closer relationship between quality technology licensing and environmental protection in real life. The ISO (International Organization for Standard) 9001 certification refers to requirements for a quality management system whereby a firm needs to demonstrate its ability to provide a product that meets customers' needs and regulatory requirements for enhancing customer satisfaction through an effective application of the system.…”

Section: Literature Reviewmentioning

confidence: 99%

“…In this case, the two firms' quality levels are s 1 = γ and s 2 = 1, respectively. Using the approach provided by Motta [20], Avenel and Caprice [21], and Li and Song [14], the inverse demand functions of the two firms are:…”

Section: Pre-licensing Equilibriummentioning

confidence: 99%

Environmental Standard, Quality Improvement, and Technology Transfer

Chang¹,

Pan

2014

TOENVIRJ

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With technology licensing on quality innovation becoming a general phenomenon in the industry, this study focuses on the impact of quality improvement under different environmental standards. We established a three-country model to analyze the actions taken by the domestic firm located in the home country with high quality technology, the foreign firm located in the foreign country with low quality technology, and the products they export to the third country. The importing country also decides on an environmental standard for reducing environmental pollution. Our major findings are: (1) A less strict environmental standard is preferable for the third country government in the beginning, but the government will become stricter with the increasing substitution of products in the long term. (2) In the aspect of licensing, the higher quality firm tends to provide an option to draw up a royalty licensing contract rather than a fixed-fee licensing contract. (3) The social welfare of the high quality firm is always higher than that of the low quality firm, but it will decrease with the increasing substitution of products. Coming from the increasing substitution of products, the excess profit that is created for the low quality firm is used as a cost for pollution abatement. Therefore, the social welfare of the foreign country does not change when the substitution of product changes. This model fully illustrates the real case of mainland China and enriches the field of technology licensing on quality innovation.JEL Codes: L11, L51, O13.

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“…One distinctive result, however, is that a drastic innovation may be transferred when the goods are imperfect substitute. Li and Song [11] have studied technology licensing in a vertically differentiated duopoly. It is shown that the high-quality firm always transfers its superior technology to the low-quality firm, irrespective of the forms of the licensing contracts.…”

Section: Introductionmentioning

confidence: 99%

Licensing Contracts in Hotelling Structure

Kabiraj¹,

Lee²

2011

TEL

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This paper discusses the question of optimal licensing contracts in Hotelling structure and focuses on the unique features of this structure in this context. We show that a royalty equilibrium exists if and only if transport cost lies in a specified interval, but the royalty rate can be higher than the amount of cost saving. While fee licensing only is never profitable, the optimal licensing contract consists of both fee and royalty. In equilibrium the market is fully covered with monopolistic goods.

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Technology licensing in a vertically differentiated duopoly

Cited by 36 publications

References 21 publications

Cost asymmetry and vertical product licensing

Cost asymmetry and vertical product licensing

Environmental Standard, Quality Improvement, and Technology Transfer

Licensing Contracts in Hotelling Structure

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