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Licensing to a durable-good monopoly

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  • Li, Changying
  • Geng, Xiaoyan

Abstract

This paper incorporates a durable-good monopoly model and re-examines the argument on licensing contracts. It shows that, from the perspective of the non-producing patent holder, the optimal licensing contract depends on the nature and the degree of the innovations. Specifically, for small cost-reducing or quality-improving innovations, charging a royalty is optimal. For large cost-reducing or quality-improving innovations, licensing by means of a fee and a royalty is superior to using either alone. However, for the case of horizontal product innovations, using a fee contract is optimal.

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File URL: http://www.sciencedirect.com/science/article/B6VB1-4RNK440-3/2/3079e70f4fbf0519a8c20b7635beb208
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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 25 (2008)
Issue (Month): 5 (September)
Pages: 876-884

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Handle: RePEc:eee:ecmode:v:25:y:2008:i:5:p:876-884

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Web page: http://www.elsevier.com/locate/inca/30411

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References

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  1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716.
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  11. Wang, X. Henry, 1998. "Fee versus royalty licensing in a Cournot duopoly model," Economics Letters, Elsevier, vol. 60(1), pages 55-62, July.
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  14. 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.
  15. Bulow, Jeremy I, 1982. "Durable-Goods Monopolists," Journal of Political Economy, University of Chicago Press, vol. 90(2), pages 314-32, April.
  16. Wang, X Henry & Yang, Bill Z, 1999. "On Licensing under Bertrand Competition," Australian Economic Papers, Wiley Blackwell, vol. 38(2), pages 106-19, June.
  17. X. Henry Wang & Bill Z. Yang, 2003. "A Note on Technology Transfer by a Monopoly," Australian Economic Papers, Wiley Blackwell, vol. 42(1), pages 50-55, 03.
  18. Henry Wang, X., 2002. "Fee versus royalty licensing in a differentiated Cournot duopoly," Journal of Economics and Business, Elsevier, vol. 54(2), pages 253-266.
  19. Sougata Poddar & Uday Bhanu Sinha, 2002. "On Patent Licensing in Spatial Competition," Departmental Working Papers wp0212, National University of Singapore, Department of Economics.
  20. Marjit, Sugata, 1990. "On a non-cooperative theory of technology transfer," Economics Letters, Elsevier, vol. 33(3), pages 293-298, July.
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Citations

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Cited by:
  1. Li, Changying & Song, Juan, 2009. "Technology licensing in a vertically differentiated duopoly," Japan and the World Economy, Elsevier, vol. 21(2), pages 183-190, March.
  2. Xue, Minggao & Su, Lili, 2011. "Licensing to a durable-good duopoly in patent litigation," Economic Modelling, Elsevier, vol. 28(3), pages 1186-1194, May.
  3. Changying Li & Junmei Wang, 2010. "Licensing a Vertical Product Innovation," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 517-527, December.
  4. Li, Changying & Ji, Xiaoming, 2010. "Innovation, licensing, and price vs. quantity competition," Economic Modelling, Elsevier, vol. 27(3), pages 746-754, May.

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