Coopetition Strategy Choice of Duopoly Manufacturers with Key Component Technology Transfer

Abstract

This paper investigates the strategic choice of key component technology transfer between two rival manufacturers. A benchmark competition model and two coopetition models (including fixed-fee licensing coopetition and two-part tariff licensing coopetition) where the manufacturers compete for end-customer demand while simultaneously collaborating on key component technology transfer through licensing. By comparing the outcomes of the competition model and coopetition models, it is shown that: (1) The optimal strategy choice for manufacturers depends on the degree of product substitution, the interfirm power relationship as well as the production cost difference of key components. Among them, the interfirm power relationship has the most significant impact on the optimal strategy choice. (2) Under certain conditions, fixed fees and two-part tariff patent licensing coopetition can achieve Pareto improvement and reduce the retail price of products, which is beneficial to both manufacturers and consumers. (3) The production cost difference of key components significantly affects whether manufacturers can achieve Pareto improvement under two coopetition models.