We argue that cross-licensing is a device to establish specialization in a multi-product Stackelberg duopoly under process innovation. The optimum licensing contracts are royalty contracts. These are designed so as to implement the joint-profit maximization (monopoly) outcome as the unique Nash equilibrium of the competition game. The monopoly-First- Best optimum is attained: each firm produces solely the good for which it has a technological advantage, firms’ joint profits attain the First Best optimum. We study the implications of limitations to contract enforceability and find that this may reduce the attained degree of specialization.but social welfare may increase.

Filippini, L., Specialization through cross-licensing in a multi-product Stackelberg duopoly, <<ECONOMICS BULLETIN>>, 2010; 2010 (Luglio): 1823-1832 [http://hdl.handle.net/10807/1554]

Specialization through cross-licensing in a multi-product Stackelberg duopoly

Filippini, Luigi
2010

Abstract

We argue that cross-licensing is a device to establish specialization in a multi-product Stackelberg duopoly under process innovation. The optimum licensing contracts are royalty contracts. These are designed so as to implement the joint-profit maximization (monopoly) outcome as the unique Nash equilibrium of the competition game. The monopoly-First- Best optimum is attained: each firm produces solely the good for which it has a technological advantage, firms’ joint profits attain the First Best optimum. We study the implications of limitations to contract enforceability and find that this may reduce the attained degree of specialization.but social welfare may increase.
Inglese
Filippini, L., Specialization through cross-licensing in a multi-product Stackelberg duopoly, <<ECONOMICS BULLETIN>>, 2010; 2010 (Luglio): 1823-1832 [http://hdl.handle.net/10807/1554]
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/10807/1554
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