Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/79645
Authors: 
Fjell, Kenneth
Foros, Oystein
Kind, Hans Jarle
Year of Publication: 
2013
Series/Report no.: 
CESifo Working Paper 4332
Abstract: 
In a model where two competing downstream firms establish an input joint venture (JV), we analyze how different royalty rules for covering fixed costs affect channel profits. Under running royalties (regardless of whether based on predicted or actual output), the downstream firms' perceived marginal costs are above the true marginal costs since fixed costs are incorporated. We find that tougher competition between the JV partners may actually increase channel profit under such a scheme. We also show that running royalties based on predicted output are outperformed by royalties based on actual output, but that lump-sum financing of the JV is preferable if the competitive pressure is weak.
Subjects: 
input joint ventures
competition
royalty rules
JEL: 
L10
Document Type: 
Working Paper

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