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Patent Licensing from a High-Cost Firm to a Low-Cost Firm

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  • SOUGATA PODDAR
  • UDAY BHANU SINHA

Abstract

We depart from the standard framework and study optimal patent licensing under Cournot duopoly where the technology transfer takes place from an innovative firm, which is relatively inefficient in terms of cost of production, to its cost-efficient rival. Interestingly, we find even a drastic technology is licensed and the optimal licensing arrangement always involves a two-part tariff (i.e. a fixed-fee plus a linear per unit output royalty). Under non-drastic innovation, the two-part tariff is optimal when the cost difference between the firms is moderate. Our framework also helps to bridge the gap between optimal licensing schemes for 'insider' and 'outsider' patentees. Copyright © 2010 The Economic Society of Australia.

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Bibliographic Info

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

Volume (Year): 86 (2010)
Issue (Month): 274 (09)
Pages: 384-395

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Handle: RePEc:bla:ecorec:v:86:y:2010:i:274:p:384-395

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Cited by:
  1. Chen, Yi-Wen & Yang, Ya-Po & Wang, Leonard F.S. & Wu, Shih-Jye, 2014. "Technology licensing in mixed oligopoly," International Review of Economics & Finance, Elsevier, vol. 31(C), pages 193-204.
  2. Wang, Kuang-Cheng Andy & Liang, Wen-Jung & Chou, Pin-Shu, 2013. "Patent licensing under cost asymmetry among firms," Economic Modelling, Elsevier, vol. 31(C), pages 297-307.
  3. Poddar, Sougata & Bouguezzi, Fehmi, 2011. "Patent licensing in spatial competition: Does pre-innovation cost asymmetry matter?," MPRA Paper 32764, University Library of Munich, Germany.

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