Abstract
This paper considers technology transfer in a Cournot-duopoly market where the firms produce horizontally differentiated products. The patent licensing contract consists of up-front fixed fee and per-unit output royalty for products of neither close substitutes nor isolated. In case the goods are close substitutes then only per-unit output royalty is the optimal solution. However, whether the incentive for imitation increases with product differentiation is ambiguous. Further, in case of credible imitation threat, the relationship between better technology transfer and product differentiation may be ambiguous. We have briefly addressed the implications of multiple licensing.
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