In this paper, we develop a model of endogenous R&D in vertical product innovation by an original manufacturer facing Bertrand competition from parallel importer(s). We show that if parallel imports are prohibited among the distributors' countries and there is at least one country other than the...

This paper studies the case where an outside patent holder licenses its vertical product innovation to two Cournot competitors. It is found that, under a fixed-fee contract, the patent holder prefers exclusive licensing. However, under a royalty or two‐part tariff contract, the patent holder...