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
Web page: http://fmwww.bc.edu/EC/
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)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anthony Creane & Hideo Konishi, 2007. "The Unilateral Incentives for Technology Transfers: Predation by Proxy (and Deterrence)," Boston College Working Papers in Economics 677, Boston College Department of Economics, revised 19 Jun 2008.
- Stamatopoulos, Giorgos & Tauman, Tami, 2009. "On the superiority of fixed fee over auction in asymmetric markets," Games and Economic Behavior, Elsevier, vol. 67(1), pages 331-333, September.
- Federico Etro, 2006. "Aggressive leaders," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 146-154, 03.
- Giebe, Thomas & Wolfstetter, Elmar, 2008.
"License auctions with royalty contracts for (winners and) losers,"
Games and Economic Behavior,
Elsevier, vol. 63(1), pages 91-106, May.
- Giebe, Thomas & Wolfstetter, Elmar G., 2007. "License Auctions with Royalty Contracts for (Winners and) Losers," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 199, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
- Anthony Creane & Hideo Konishi, 2009. "Goldilocks and the Licensing Firm: Choosing a Partner when Rivals are Heterogeneous," Boston College Working Papers in Economics 720, Boston College Department of Economics.
- Katharine E. Rockett, 1990. "Choosing the Competition and Patent Licensing," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 161-171, Spring.
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