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Licensing and R&D Investment of Duopolistic Firms with Partially Complementary Technologies

Author

Listed:
  • Testuya Shinkai

    (Kwansei Gakuin University)

  • Satoru Tanaka

    (Kobe City University of Foreign Studies)

  • Makoto Okamura

    (Hiroshima University)

Abstract

We consider research and development (R&D) investment competition between duopolistic firms that independently invest in two complementary technologies to produce their products. By "partially complementary technologies", we mean that each firm can produce the goods without both technologies but they incur more redundant costs than with both technologies. We derive the investment competition equilibria in R&D of the two technologies with and without a licensing system. By comparing R&D investment levels in the two equilibria, we show that the licensing system discourages R&D investment in most cases; however, it encourages R&D investment in some cases when the duopolistic firms can produce the goods using both technologies. We also show that (cross-) licensing increases the expected social surplus at the symmetric equilibrium.

Suggested Citation

  • Testuya Shinkai & Satoru Tanaka & Makoto Okamura, 2005. "Licensing and R&D Investment of Duopolistic Firms with Partially Complementary Technologies," Discussion Paper Series 25, School of Economics, Kwansei Gakuin University, revised Mar 2005.
    • Handle: RePEc:kgu:wpaper:25
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    References listed on IDEAS

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    More about this item

    Keywords

    partially complementary technologies; licensing system; duopoly; R&D investment;
    All these keywords.

    JEL classification:

    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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