Patent Licensing and Technological Catch-Up in a Heterogeneous Duopoly
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A cost-reducing innovation is available to Cournot duopolists through licensing. The firms are ex ante heterogeneous and adoption of the innovation impacts them differently. Is it possible for the inefficient duopolist to catch up with its efficient rival? Under certain conditions, yes. The conditions, however, are stringent: It is not sufficient, for instance, that the innovation promotes a change in the efficiency rank of the firms.
KeywordsPatent licensing Cournot duopoly with heterogeneous firms Cost-reducing innovation Technological catch-up
I am thankful to the General Editor, Larry White, and two anonymous referees for thoughtful comments and suggestions. I am also thankful to Yair Tauman and participants at the 28th Stony Brook International Conference on Game Theory. Any errors are my own.
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