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COMPETITION AND WELFARE: THE IMPLICATIONS OF LICENSING *
Author(s) -
MUKHERJEE ARIJIT
Publication year - 2010
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2009.02126.x
Subject(s) - cournot competition , bertrand paradox (economics) , economics , economic surplus , bertrand competition , competition (biology) , welfare , microeconomics , consumer welfare , profit (economics) , industrial organization , oligopoly , market economy , ecology , biology
If firms with asymmetric costs can engage in technology licensing, we show that welfare may be higher under Cournot competition than under Bertrand competition. Under fixed‐fee licensing, consumer surplus and welfare are higher under Cournot competition if the technological difference between the firms is moderate. Under royalty licensing, if the bargaining power of the licenser is not very high and the technological difference between the firms is large, consumer surplus and welfare are higher under Cournot competition. We also show that technology licensing has important implications on the profit differential between Bertrand and Cournot competition.