We study the licensing incentives of an independent input producer owning a patented product innovation which allows the downstream firms to improve the quality of their final goods. We consider a general two-part tariff contract for both outside and incumbent innovators. We find that technology...

The optimal design of two-part tariffs is investigated in a dynamic model where two firms belonging to the same supply chain invest in R&D activities to increase the quality of the final product. It is shown that the replication of the vertically integrated monopolist's performance can be...