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On Patent Licensing in Spatial Competition

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  • Sougata Poddar
  • Uday Bhanu Sinha

Abstract

We consider the optimal licensing strategy of an outsider patentee as well as an insider patentee in a linear city framework where firms compete in price. We show that offering royalty is best for an outsider patentee for both drastic and non-drastic innovations. For an insider patentee, offering no license is the best when the innovation is drastic, while royalty is optimal when the innovation is non-drastic. The incentive for innovation is higher for an outsider patentee compared to an insider patentee. The overall increase in welfare due to an innovation is the same for both outsider and insider patentees. Copyright � 2004 Economic Society of Australia..

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Bibliographic Info

Article provided by The Economic Society of Australia in its journal The Economic Record.

Volume (Year): 80 (2004)
Issue (Month): 249 (06)
Pages: 208-218

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Handle: RePEc:bla:ecorec:v:80:y:2004:i:249:p:208-218

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  1. Wang, X. Henry, 1998. "Fee versus royalty licensing in a Cournot duopoly model," Economics Letters, Elsevier, vol. 60(1), pages 55-62, July.
  2. Beggs, A. W., 1992. "The licensing of patents under asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 10(2), pages 171-191, June.
  3. Katz, Michael L & Shapiro, Carl, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 567-89, August.
  4. Oz Shy, 1996. "Industrial Organization: Theory and Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691795, December.
  5. Kamien, Morton I. & Oren, Shmuel S. & Tauman, Yair, 1992. "Optimal licensing of cost-reducing innovation," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 483-508.
  6. Sougata Poddar & Uday Bhanu Sinha, 2002. "The Role of Fixed Fee and Royalty in Patent Licensing," Departmental Working Papers wp0211, National University of Singapore, Department of Economics.
  7. Nancy T. Gallini & Brian D. Wright, 1990. "Technology Transfer under Asymmetric Information," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 147-160, Spring.
  8. Kamien, Morton I & Tauman, Yair, 1986. "Fees versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 471-91, August.
  9. Kamien, Morton I., 1992. "Patent licensing," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 11, pages 331-354 Elsevier.
  10. Choi, J.P., 1995. "Technology Transfer with Moral Hazard," Discussion Papers 1995_16, Columbia University, Department of Economics.
  11. Muto Shigeo, 1993. "On Licensing Policies in Bertrand Competition," Games and Economic Behavior, Elsevier, vol. 5(2), pages 257-267, April.
  12. SHY, Oz & THISSE, Jacques-François, . "A strategic approach to software protection," CORE Discussion Papers RP -1413, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Kamien, Morton I & Tauman, Yair, 2002. "Patent Licensing: The Inside Story," Manchester School, University of Manchester, vol. 70(1), pages 7-15, January.
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