BERTRAND VS. COURNOT COMPETITION INASYMMETRIC DUOPOLY: THE ROLE OFLICENSING

This paper shows the possibility of higher welfare under Cournot competitionin an asymmetric cost duopoly when the firms have the option for technology licensing.We find that if there is licensing with up-front fixed-fee, welfare is higher under Cournotcompetition compared to Bertrand competition when the initial cost difference of thesefirms is moderate; but, for very small or very large cost initial cost differences, welfare ishigher under Bertrand competition. If licensing occurs with per-unit output royalty,welfare is always higher under Bertrand competition.