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Optimal licensing policy under vertical product differentiation

journal contribution
posted on 2017-01-01, 00:00 authored by Xuan NguyenXuan Nguyen, Pasquale Sgro, Munirul NabinMunirul Nabin
This paper explores a vertical product differentiation model with a licensing arrangement between a multinational firm with superior technology and a domestic firm with obsolete technology. We find that a subsidy provided by the domestic country's government to the domestic firm to assist with the licensing arrangement is welfare enhancing for the domestic country. Furthermore, both the multinational firm and the domestic country are better off under royalty than under fixed fee licensing. These findings stand in contrast to earlier results in the literature.

History

Journal

Review of development economics

Volume

21

Issue

3

Pagination

497 - 510

Publisher

Wiley

Location

London, Eng.

ISSN

1467-9361

eISSN

1467-9361

Language

eng

Publication classification

C Journal article; C1 Refereed article in a scholarly journal

Copyright notice

2016, Wiley

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