Licensing cost‐reducing innovations under supply function competition

In this paper, we study the licensing of cost-reducing innovations in a duopoly under supply function competition. We show that innovator prefers fixed-fee to no if its cost advantage is not extremely large. Moreover, small, and mixed revenue-royalty licensing. This second result arises only because our assumption functions are quadratic. linear royalty payments per unit output, strictly also model, consumer surplus remarkably higher any type than However, slightly superior for consumers other two types so sufficiently