Cross-border merger and domestic welfare

We consider the welfare effect of cross-border merger in presence of international R&D competition. Cross-border merger increases domestic welfare if the bargaining power of the foreign firm and the slope of the marginal cost of R&D are sufficiently low. Otherwise, domestic welfare is lower under cross-border merger.

Knowledge spillover, licensing and patent protection

This paper investigates the effect of different patent regimes on R&D investment and social welfare in a duopoly market with uncertain R&D process. We find that strong patent protection increases R&D investment of at least one firm but whether both firmsí R&D investment will be more under strong patent protection is ambiguous. While ex-ante welfare is more likely to be higher under strong patent protection, ex-post welfare may be higher under strong patent protection. Whether the possibility of licensing increases both firms' R&D investment is also ambiguous. Licensing with up-front fixed-fee can increase policy dilemma by increasing the possibility of higher ex-ante welfare under strong patent protection but higher ex-post welfare under weak patent protection. However, the results may be different for licensing contract with per-unit output royalty.

Advantageous or Disadvantageous Semi-collusion Licensing in a Vertically Separated Industry

This paper compares profits and consumer surplus under non-cooperation and collusion in the product market when the firms have the option for R&D before production. We show that whether R&D investment would be higher under non-cooperation or product market collusion depends on the R\&D productivity. If the market size is sufficiently small then firms are always better off under product market collusion. If the market size is moderate (relatively large) then the firms are better off under non- cooperation (semi-collusion) for sufficiently lower pre-innovation costs of production. We also show that in case of moderate (relatively large) market size, firms are better off under non-cooperation for relatively lower (higher) R&D productivity. However, we find that consumer welfare is always higher under non-cooperation in product market compared to collusion in product market.Entry,Consumer surplus, Collusion, Profit, Uncertain R&D

Excessive entry in a bilateral oligopoly

In a bilateral oligopoly, Ghosh and Morita (‘Social desirability of free entry: a bilateral oligopoly analysis, 2007, IJIO) show that entry is always socially insufficient if the upstream agents have sufficiently strong bargaining power. We show that this conclusion is very much dependent on the use of “efficient bargaining” model in their analysis. Using a “right-to-manage” model, we show that, even if the upstream agents have full bargaining power, entry is excessive in a bilateral oligopoly if the cost of entry is not very high. Hence, whether the anti-competitive entry regulation is justified under bilateral oligopoly depends on the bargaining structure between the upstream and the downstream agents.Bilateral oligopoly; Excessive entry; Free entry; Insufficient entry

Licensing and the Incentive for Innovation

Previous literature has mostly considered R&D and licensing activities separately. In this paper we examine the effect of licensing on R&D and social welfare. We show that the effect of licensing on the incentive for doing R&D is ambiguous and depends on the costs of doing R&D. We also show that the possibility of licensing can change the identity of the innovating firm. However, we find that social welfare is non- decreasing in presence of licensing.Licensing, R&D, Welfare

Optimal licensing contract in an open economy

Empirical evidences show that technology licensing contracts differ significantly and may consist of only up-front fixed-fee, only output royalty or the combinations of fixed-fee and output royalty. We explain these possibilities under international technology transfer. The trade-off between the incentive for saving the transportation cost of exporting and the incentive for reducing competition after licensing is responsible for the results. Our explanation differs from the existing studies where imitation and product differentiation are responsible for different licensing contracts.

Entry in a Stackelberg perfect equilibrium

This paper considers welfare effects of entry when the incumbent firm behaves like a Stackelberg leader in the product market. In contrast to the existing literature, we show that entry may increase welfare for any cost asymmetries between the firms. Using a general demand function we show the condition for welfare improving entry.Cournot competition Entry Stackelberg competition Welfare

Innovation, Licensing and Welfare

This paper examines how the option for licensing affects research and development (R&D) and social welfare. We find that if cost reduction from R&D is sufficiently small and there is an option of licensing, firms will do non-cooperative R&D. In absence of licensing, firms will do cooperative R&D for sufficiently small cost reduction from R&D. Whether the option for licensing increases social welfare is ambiguous. If the possibility of licensing increases probability of success in R&D significantly then welfare is higher in presence of licensing.Cooperative R&D, Licensing, Welfare

Price discrimination in oligopoly with asymmetric firms

We generalize the analyses of Hazledine (2006, “Price discrimination in Cournot-Nash oligopoly”, Economics Letters) and Kutlu (2009, “Price discrimination in Stackelberg competition”, Journal of Industrial Economics) with asymmetric cost firms. We show that the main result of Hazledine, which shows that the average revenue is not dependent on the extent of price discrimination, remains under cost asymmetry but at the industry level. However, the main result of Kutlu, which shows that the Stackelberg leader does not price discriminate at all, does not hold under cost asymmetry. Both the leader and the follower discriminate price under cost asymmetry.Cost asymmetry; Cournot competition; Price discrimination; Stackelberg competition