On the Licensing of Innovations under Strategic Delegation

This note uses a three-stage delegation-licensing-quantity game to study the licensing of a cost-reducing innovation by a patent-holding firm to its competitor. It is shown that licensing is less likely to occur under strategic delegation compared to no delegation.licensing strategic delegation

On Technology Transfer to an Asymmetric Cournot Duopoly

This note studies the transfer of a cost-reducing innovation from an independent patent-holder to an asymmetric Cournot duopoly that has different unit costs of production. It is found that royalty licensing can be superior to fixed-fee licensing for the independent patent-holder.Cournot duopoly

Price and Quantity Competition Revisited

By enlarging the parameter space originally considered by Singh and Vives (1984) to allow for a wider range of cost asymmetry, Zanchettin (2006) finds that the Singh and Vives result that firms always make larger profits under quantity competition than under price competition fails to hold. This paper shows that while profit ranking between price and quantity competition can be (partially) reversed the celebrated result by Singh and Vives that firms always choose a quantity contract in a two-stage game continues to hold in the enlarged parameter space.

Customization: Ideal Varieties, Product Uniqueness and Price Competition

We study customization in the Hotelling model with two firms. In addition to providing ideal varieties, the perceived uniqueness of a customized product contributes independently to consumer utility. We show that only when consumer preferences for uniqueness are high customization occurs in equilibrium.customization, product differentiation, product uniqueness, price competition

Why Are Firms Sometimes Unwilling to Reduce Costs?

This paper establishes three new results for multiproduct oligopolies: 1) it presents the first explicit expression of Nash equilibria for asymmetric multiproduct oligopolies; 2) it shows that reducing a multiproduct firms cost in Bertrand oligopolies will reduce its profits if the cost-reducing unit is sufficiently small; and 3) it demonstrates that a multiproduct firm has no incentive to eliminate a product whose sales are zero. Because a single-product firm whose sales are zero is indifferent between exiting and staying, and its cost reductions always increase its profits, our results are unique to the multiproduct firm, and they suggest that extending oligopoly studies from a single product to multi-products could be as significant as the extension of calculus from a single variable to multi-variables.Effect of cost reduction, multiproduct oligopoly, price competition, quantity competition

Free Entry in a Cournot Market with Imperfectly Substituting Goods

Two results are shown about the free-entry equilibrium in a Cournot market with asymmetric firms and imperfectly substituting goods. First, only one technology will survive in the production of each good. Second, some good(s) may not be produced. Specifically, we show that in a two-good model only one good is produced if the substitution parameter is higher than a critical value and both goods are produced for smaller substitution parameter values.Free-entry equilibrium; Cournot competition; substituting goods

On Welfare under Cournot and Bertrand Competition in Differentiated Oligopolies

Hackner (2000) shows that in a differentiated oligopoly with more than two firms , prices may be higher under Bertrand competition than under Cournot competition, implying that the classical result of Singh and Vives (1984) that Bertrand prices are always lower than Cournot prices is sensitive to the duopoly assumption. Hackner (2000), however, leaves unanswered the important question of whether welfare may be lower under price competition. This note shows that in Hackners model both consumer surplus and total surplus are higher under price competition than under quantity competition regardless of whether goods are substitutes or complements.Bertrand; Cournot; Differentiated oligopoly; Welfare