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Social Optimal Licensing of Innovations

Author

Listed:
  • Creane, A.

Abstract

A profit-maximizing monopolist licenses a cost-reducing innovation to downstream firms that compete strategically. Katz and Shapiro (1986) find the seemingly obvious result that "the [monopolist's] incentive to disseminate the innovation typically are too low." Instead, the author finds that the incentives are typically too high. Only if the lab is owned by more than half of the firms and does not disseminate the innovation to all member, would the incentives always be too low. Social incentives can be less than the private incentives for even one license. These changes come from relaxing previous authors' assumption that it is cost-less to install the innovation.

Suggested Citation

  • Creane, A., 1998. "Social Optimal Licensing of Innovations," Papers 9803, Michigan State - Econometrics and Economic Theory.
    • Handle: RePEc:fth:mistet:9803
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    More about this item

    Keywords

    OPTIMUM CHOICE ; INNOVATIONS ; LICENCES;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital

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