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Choosing a Production Joint Venture Partner

Author

Listed:
  • Rong Ding
  • Chiu Yu Ko
  • Bo Shen

Abstract

We study how a firm inside or outside an industry selects a partner among asymmetric firms to form a production joint venture (PJV), in which technology transfer takes place. We show that the partner selected under a two-part tariff contractis always (weakly) more efficient than the one selected under a first-price auction. Comparing these two schemes, we find that a two-part tariff contract can be superior for the most efficient incumbent firm or for an outside innovator, while a first-price auction is always superior for the least efficient incumbent firm. Moreover, in terms of consumer surplus and welfare, two-part tariff contract is always (weakly) superior.

Suggested Citation

  • Rong Ding & Chiu Yu Ko & Bo Shen, 2020. "Choosing a Production Joint Venture Partner," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 176(4), pages 665-685.
    • Handle: RePEc:mhr:jinste:urn:doi:10.1628/jite-2020-0039
    DOI: 10.1628/jite-2020-0039
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    More about this item

    Keywords

    joint venture; asymmetric firms; two-part tariff; first-price auction;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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