Choosing a Licensee from Heterogeneous Rivals
AbstractWe examine a firm that can license its production technology to a rival when firms are heterogeneous in production costs. We show that a complete technology transfer from one firm to another always increases joint profit under weakly concave demand when at least three firms remain in the industry. A jointly profitable transfer may reduce social welfare, although a jointly profitable transfer from the most efficient firm always increases welfare. We also consider two auction games under complete information: a standard first-price auction and a menu auction by Bernheim and Whinston (1986). With natural refinement of equilibria, we show that the resulting licensees are ordered by degree of efficiency: menu auction, simple auction, and joint-profit maximizing licensees, in (weakly) descending order.
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Bibliographic InfoPaper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 779.
Date of creation: 30 Sep 2011
Date of revision: 06 Apr 2013
Publication status: published, Games and Economic Behavior, 82, 254-268 (2013)
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Postal: Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA
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More information through EDIRC
licensing; production costs; technology transfer; auction games;
Other versions of this item:
- D4 - Microeconomics - - Market Structure and Pricing
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
- L4 - Industrial Organization - - Antitrust Issues and Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-15 (All new papers)
- NEP-COM-2011-10-15 (Industrial Competition)
- NEP-GTH-2011-10-15 (Game Theory)
- NEP-IPR-2011-10-15 (Intellectual Property Rights)
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