IDEAS home Printed from https://ideas.repec.org/a/kap/jeczfn/v139y2023i1d10.1007_s00712-023-00818-x.html
   My bibliography  Save this article

More licensed technologies may make it worse: a welfare analysis of licensing vertically two-tier foreign technologies

Author

Listed:
  • Ku-Chu Tsao

    (Tunghai University)

  • Jin-Li Hu

    (National Yang Ming Chiao Tung University)

  • Hong Hwang

    (National Taiwan University and RCHSS, Academia Sinica)

  • Yan-Shu Lin

    (National Dong Hwa University)

Abstract

This research analyzes the impacts of acquiring vertically two-tier cost-saving foreign technologies through licensing on the home economy’s industry profit, consumer surplus, and social welfare. It is found that upstream (downstream) licensing only leads to higher social welfare than the two-tier licensing if the downstream innovation size is small (large) — that is, acquiring more licensed foreign technologies at different tiers in vertically related markets may worsen the domestic welfare. The above results still hold in leader–follower competition under the two-tier licensing regime and even for the case where this two-tier cost-saving technology is present within the home economy itself.

Suggested Citation

  • Ku-Chu Tsao & Jin-Li Hu & Hong Hwang & Yan-Shu Lin, 2023. "More licensed technologies may make it worse: a welfare analysis of licensing vertically two-tier foreign technologies," Journal of Economics, Springer, vol. 139(1), pages 71-88, June.
    • Handle: RePEc:kap:jeczfn:v:139:y:2023:i:1:d:10.1007_s00712-023-00818-x
    DOI: 10.1007/s00712-023-00818-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s00712-023-00818-x
    File Function: Abstract
    Download Restriction: no
    File URL: https://libkey.io/10.1007/s00712-023-00818-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Morton I. Kamien & Yair Tauman, 1986. "Fees Versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(3), pages 471-491.
    2. Jiyun Cao & Arijit Mukherjee, 2017. "Market Power of the Input Supplier, Technology Transfer and Consumer Welfare," Manchester School, University of Manchester, vol. 85(4), pages 430-449, July.
    3. Bakaouka, Elpiniki & Milliou, Chrysovalantou, 2018. "Vertical licensing, input pricing, and entry," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 66-96.
    4. Rey, Patrick & Tirole, Jean, 2007. "A Primer on Foreclosure," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 33, pages 2145-2220, Elsevier.
    5. Wang, X. Henry, 1998. "Fee versus royalty licensing in a Cournot duopoly model," Economics Letters, Elsevier, vol. 60(1), pages 55-62, July.
    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. Germain Gaudin, 2019. "Vertical relations, opportunism, and welfare," RAND Journal of Economics, RAND Corporation, vol. 50(2), pages 342-358, June.
    8. Chin-Sheng Chen, 2017. "Endogenous Market Structure and Technology Licensing," The Japanese Economic Review, Japanese Economic Association, vol. 68(1), pages 115-130, March.
    9. Morton I. Kamien & Yair Tauman, 2002. "Patent Licensing: The Inside Story," Manchester School, University of Manchester, vol. 70(1), pages 7-15, January.
    10. repec:unt:esctis:tis16 is not listed on IDEAS
    11. Neelanjan Sen & Saumya Kaul & Rajit Biswas, 2021. "Technology licensing under product differentiation," Journal of Economics, Springer, vol. 134(3), pages 219-260, December.
    12. Xuan Nguyen & Pasquale Sgro & Munirul Nabin, 2017. "Optimal Licensing Policy under Vertical Product Differentiation," Review of Development Economics, Wiley Blackwell, vol. 21(3), pages 497-510, August.
    13. Chin-Sheng Chen, 2017. "Endogenous Market Structure and Technology Licensing," The Japanese Economic Review, Springer, vol. 68(1), pages 115-130, March.
    14. Mukherjee, Arijit & Pennings, Enrico, 2006. "Tariffs, licensing and market structure," European Economic Review, Elsevier, vol. 50(7), pages 1699-1707, October.
    15. Anil Arya & Brian Mittendorf, 2006. "Enhancing Vertical Efficiency Through Horizontal Licensing," Journal of Regulatory Economics, Springer, vol. 29(3), pages 333-342, May.
    16. 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.
    17. Kitagawa, Tatsuya & Masuda, Yasushi & Umezawa, Masashi, 2014. "Patent strength and optimal two-part tariff licensing with a potential rival," Economics Letters, Elsevier, vol. 123(2), pages 227-231.
    18. Stenbacka, Rune & Van Moer, Geert, 2021. "Cross ownership and divestment incentives," Economics Letters, Elsevier, vol. 201(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kuang-Cheng Andy Wang & Dang-Long Bui & Yi-Jie Wang & Wen-Jung Liang, 2023. "International licensing under an endogenous tariff in vertically-related markets," Journal of Economics, Springer, vol. 139(2), pages 93-123, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kabiraj, Abhishek & Kabiraj, Tarun, 2017. "Tariff induced licensing contracts, consumers’ surplus and welfare," Economic Modelling, Elsevier, vol. 60(C), pages 439-447.
    2. Kim, Seung-Leul & Lee, Sang-Ho, 2016. "The licensing of eco-technology under emission taxation: Fixed fee vs. auction," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 343-357.
    3. Sen, Debapriya & Stamatopoulos, Giorgos, 2016. "Licensing under general demand and cost functions," European Journal of Operational Research, Elsevier, vol. 253(3), pages 673-680.
    4. Miao, Chun-Hui, 2016. "Licensing a technology standard," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 33-61.
    5. Kuang-Cheng Andy Wang & Ching-Chih Tseng & Wen-Jung Liang, 2016. "Patent Licensing in the Presence of Trade Barriers," The Japanese Economic Review, Japanese Economic Association, vol. 67(3), pages 329-347, September.
    6. Saracho, Ana I., 2011. "Licensing information goods," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 187-199, March.
    7. Yan, Qingyou & Yang, Le, 2018. "Optimal licensing schemes for a mixed ownership firm when facing uncertain R&D outcomes and technology spillover," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 550-572.
    8. Kim, Seung-Leul & Lee, Sang-Ho, 2021. "Optimal tariffs with emissions taxes under non-restrictive two-part licensing strategies by a foreign eco-competitor," MPRA Paper 108496, University Library of Munich, Germany.
    9. Tauman, Yair & Weng, Ming-Hung, 2012. "Selling patent rights and the incentive to innovate," Economics Letters, Elsevier, vol. 114(3), pages 241-244.
    10. Marta San Martín & Ana I. Saracho, 2015. "Optimal Two-part Tariff Licensing Mechanisms," Manchester School, University of Manchester, vol. 83(3), pages 288-306, June.
    11. 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.
    12. Debapriya Sen & Giorgos Stamatopoulos, 2009. "Technology Transfer Under Returns To Scale," Manchester School, University of Manchester, vol. 77(3), pages 337-365, June.
    13. Arijit Mukherjee, 2010. "Technology licensing under convex costs," Discussion Papers 10/05, University of Nottingham, School of Economics.
    14. 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.
    15. Stefano Colombo & Luigi Filippini, 2015. "Patent Licensing with Bertrand Competitors," Manchester School, University of Manchester, vol. 83(1), pages 1-16, January.
    16. repec:ebl:ecbull:v:15:y:2005:i:15:p:1-10 is not listed on IDEAS
    17. Mukherjee, Arijit, 2010. "Licensing a new product: Fee vs. royalty licensing with unionized labor market," Labour Economics, Elsevier, vol. 17(4), pages 735-742, August.
    18. 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.
    19. Bagchi, Aniruddha & Mukherjee, Arijit, 2014. "Technology licensing in a differentiated oligopoly," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 455-465.
    20. Sinha, Uday Bhanu, 2016. "Optimal value of a patent in an asymmetric Cournot duopoly market," Economic Modelling, Elsevier, vol. 57(C), pages 93-105.
    21. 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.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jeczfn:v:139:y:2023:i:1:d:10.1007_s00712-023-00818-x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.