Abstract: Involving strategic behavior of enterprises' technology licensing, the assumption of the third market model is released. And a game model of four-stage duopolistic R&D rivalry is established by means of backward induction used usually in the uncooperative game theory. The optimal R&D policies considered consumer surplus by respective governments when competitor has incomplete bargaining power is examined. Results and conclusions are as follows: Firstly, consideration of consumer surplus by country affects subsidy rate for enterprise's R&D, and thus R&D behavior of competitor. Secondly, the strategic behavior of enterprises' technology licensing has impacts on government R&D policies only when technology leader makes minor non-drastic innovation. Finally, bilateral government optimal R&D policies are different in different strategies of technology licensing. Concerning the licensor, the R&D subsidy rate by its government is higher in fixed-fee licensing than that in output-royalty licensing. Meanwhile, the expectation of bargaining power by both licensor and licensee affects respective government R&D polices with certain technology licensing strategies. Under the condition of output-royalty licensing, the R&D subsidy rate by its government is reversely higher with the reduction of its bargaining power concerning the licensee enterprise.

Key words: consumer surplus, third market model, R&D subsidy policy, bargaining power, technology licensing