Location equilibrium with asymmetric firms: the role of licensing |
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Authors: | Toshihiro Matsumura Noriaki Matsushima Giorgos Stamatopoulos |
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Institution: | (2) Hewlett Packard, Palo Alto, USA; |
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Abstract: | It is known that if exogenous cost heterogeneities between the firms in a spatial duopoly model are large, then the model
does not have a pure-strategy equilibrium in location choices. It is also known that when these heterogeneities are stochastically
determined after firms choose their locations, spatial agglomeration can appear. To tackle these issues, the current paper
modifies the spatial framework by allowing firms to exchange the cost-efficient production technology via royalties. It is
shown that technology transfer guarantees the existence of a location equilibrium in pure strategies and that maximum differentiation
appears in the market. |
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Keywords: | |
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