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Optimal Licensing in a Spatial Model

Author

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  • Francisco Caballero-Sanz
  • Rafael Moner-Colonques
  • José J. Sempere-Monerris

Abstract

We analyze a multi-stage non-cooperative game involving an outside patent-holder, who seeks to licence a process innovation, and two price-setting firms located on a circumference. Three licensing policies are studied: the auction, the fixed fee and the per unit output royalty. The main finding is that, contrary to standard results, royalties yield higher payoffs to the patent-holder than do an auction policy or a fixed fee policy regardless of the size of the innovation. Besides, a conflict between private and social interests arises since consumers are better off when the technology is licensed via fees.

Suggested Citation

  • Francisco Caballero-Sanz & Rafael Moner-Colonques & José J. Sempere-Monerris, 2002. "Optimal Licensing in a Spatial Model," Annals of Economics and Statistics, GENES, issue 66, pages 257-279.
    • Handle: RePEc:adr:anecst:y:2002:i:66:p:257-279
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    Cited by:

    1. Lemarié, S., 2005. "Vertical integration and the licensing of innovation with a fixed fee or a royalty," Working Papers 200517, Grenoble Applied Economics Laboratory (GAEL).
    2. John Heywood & Zheng Wang, 2015. "How to license a transport innovation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(2), pages 485-500, December.
    3. Toshihiro Matsumura & Noriaki Matsushima, 2007. "On patent licensing in spatial competition with endogenous location choice," Discussion Papers 2007-35, Kobe University, Graduate School of Business Administration.
    4. Poddar, Sougata & Bouguezzi, Fehmi, 2011. "Patent licensing in spatial competition: Does pre-innovation cost asymmetry matter?," MPRA Paper 32764, University Library of Munich, Germany.
    5. Ana Mauleon & Vincent Vannetelbosch & Cecilia Vergari, 2013. "Bargaining and delay in patent licensing," International Journal of Economic Theory, The International Society for Economic Theory, vol. 9(4), pages 279-302, December.
    6. Sen, Debapriya & Tauman, Yair, 2007. "General licensing schemes for a cost-reducing innovation," Games and Economic Behavior, Elsevier, vol. 59(1), pages 163-186, April.
    7. Meniere, Yann & Parlane, Sarah, 2010. "Decentralized licensing of complementary patents: Comparing the royalty, fixed-fee and two-part tariff regimes," Information Economics and Policy, Elsevier, vol. 22(2), pages 178-191, May.
    8. PARLANE, Sarah & MENIERE, Yann, 2006. "Licensing a standard: fixed fee versus royalty," LIDAM Discussion Papers CORE 2006116, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    9. Amir, Rabah & Encaoua, David & Lefouili, Yassine, 2014. "Optimal licensing of uncertain patents in the shadow of litigation," Games and Economic Behavior, Elsevier, vol. 88(C), pages 320-338.
    10. Neelanjan Sen, 2015. "Technology Transfer in Oligopoly in Presence of Fixed-Cost in Production," Journal of Industry, Competition and Trade, Springer, vol. 15(4), pages 383-409, December.
    11. Arijit Mukherjee & Yingyi Tsai, 2013. "Technology licensing under optimal tax policy," Journal of Economics, Springer, vol. 108(3), pages 231-247, April.
    12. Bouguezzi, Fehmi & EL ELJ, Moez, 2009. "Vertical Integration and Patent Licensing in Upstream and Downstream Markets," MPRA Paper 22212, University Library of Munich, Germany.
    13. Matthew D. Henry & John L. Turner, 2010. "Patent Damages And Spatial Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 58(2), pages 279-305, June.
    14. Lu, Yuanzhu & Poddar, Sougata, 2014. "Patent licensing in spatial models," Economic Modelling, Elsevier, vol. 42(C), pages 250-256.
    15. Stefano Colombo, 2014. "Fee versus royalty licensing in spatial Cournot competition," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(3), pages 859-879, May.
    16. Chen, Jingxian & Liang, Liang & Yao, Dong-qing, 2017. "An analysis of intellectual property licensing strategy under duopoly competition: Component or product-based?," International Journal of Production Economics, Elsevier, vol. 193(C), pages 502-513.
    17. M?ni?re, Yann & Parlane, Sarah, 2008. "Decentralized of licensing of complementary patents: comparing royalty, fixed fee and two part tariff," PIE/CIS Discussion Paper 383, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.

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