Product Innovation in a Vertically Differentiated Model

Download or read book Product Innovation in a Vertically Differentiated Model written by Luigi Filippini and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the licensing incentives of an independent input producer owning a patented product innovation which allows the downstream ጿirms to improve the quality of their ጿinal goods. We consider a general two-part tariff contract for both outside and incumbent innovators. We ጿind that technology diffusion critically depends on the nature of market competition (Cournot vs. Bertrand). Moreover, the vertical merger with either downstream ጿirm is always privately proijtable and it is welfare improving for large innovations: this implies that not all proijtable mergers should be rejected.