Innovation,licensing, and price vs. quantity competition |
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Authors: | Changying Li Xiaoming Ji |
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Institution: | 1. Institute of Economics, Nankai University, Tianjin, 300071, PR China;2. Center for Transnational Studies, Nankai University, Tianjin 300071, PR China |
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Abstract: | In this paper, we develop a differentiated duopoly model with endogenous cost-reducing R&D and review the argument on welfare effect of price and quantity competition in the presence of technology licensing. We show that, with licensing, the standard conclusion on duopoly (Singh and Vives, 1984) is completely reversed. Cournot competition induces lower R&D investment than Bertrand competition does. Moreover, Cournot competition leads to lower prices, lower industry profit, higher consumer surplus and higher social welfare than Bertrand competition. |
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Keywords: | L13 D43 |
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