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Optimal Licensing Policy in Differentiated Industries

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  • Nisvan Erkal

Abstract

This paper analyses the policy implications of licensing between producers of differentiated goods. We consider and compare two-part tariff, fixed fee, royalty and collusive licensing contracts. Under the optimal licensing policy, there will be no technology transfers if the innovation size is sufficiently small and degree of product differentiation is sufficiently low. On the other hand, licensing deals that involve drastic innovations are always socially desirable. In the limit, as product differentiation converges to zero, it becomes socially desirable to transfer drastic innovations only. The range of innovation sizes that is socially optimal to transfer increases as product differentiation increases.

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Bibliographic Info

Paper provided by The University of Melbourne in its series Department of Economics - Working Papers Series with number 894.

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Length: 36 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:mlb:wpaper:894

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Keywords: Patent licensing; product differentiation; antitrust policy;

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References

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  1. Choi, J.P., 1995. "Technology Transfer with Moral Hazard," Discussion Papers 1995_16, Columbia University, Department of Economics.
  2. Richard Gilbert & Carl Shapiro, 1997. "Antitrust Issues in the Licensing of Intellectual Property: The Nine No-No's Meet the Nineties," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 283-349.
  3. Nirvikar Singh & Xavier Vives, 1984. "Price and Quantity Competition in a Differentiated Duopoly," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 546-554, Winter.
  4. Sougata Poddar & Uday Bhanu Sinha, 2002. "On Patent Licensing in Spatial Competition," Departmental Working Papers wp0212, National University of Singapore, Department of Economics.
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Citations

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Cited by:
  1. Stefano Colombo & Luigi Filippini, 2012. "Patent licensing with Bertrand competitors," DISCE - Quaderni dell'Istituto di Teoria Economica e Metodi Quantitativi itemq1262, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  2. Li, Changying & Geng, Xiaoyan, 2008. "Licensing to a durable-good monopoly," Economic Modelling, Elsevier, vol. 25(5), pages 876-884, September.
  3. Nisvan Erkal, 2004. "Optimal Licensing Policy in Differentiated Industries," Department of Economics - Working Papers Series 894, The University of Melbourne.
  4. Stefano Colombo, 2014. "Fee versus royalty licensing in spatial Cournot competition," The Annals of Regional Science, Springer, vol. 52(3), pages 859-879, May.
  5. Yann Ménière & Sarah Parlane, 2010. "Decentralized licensing of complementary patents: Comparing the royalty, fixed-fee and two-part tariff regimes," Post-Print hal-00460754, HAL.
  6. BHATTACHARYA, Sudipto & D’ASPREMONT, Claude & GURIEV, Sergei & SEN, Debapriya, 2012. "Cooperation in R&D: patenting, licensing and contracting," CORE Discussion Papers 2012055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Li, Changying & Song, Juan, 2009. "Technology licensing in a vertically differentiated duopoly," Japan and the World Economy, Elsevier, vol. 21(2), pages 183-190, March.
  8. Poddar, Sougata & Bouguezzi, Fehmi, 2011. "Patent licensing in spatial competition: Does pre-innovation cost asymmetry matter?," MPRA Paper 32764, University Library of Munich, Germany.
  9. Changying Li & Junmei Wang, 2010. "Licensing a Vertical Product Innovation," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 517-527, December.
  10. Yair Tauman & Debrapiya Sen, 2012. "Patents and Licenses," Department of Economics Working Papers 12-05, Stony Brook University, Department of Economics.
  11. Li, Changying & Ji, Xiaoming, 2010. "Innovation, licensing, and price vs. quantity competition," Economic Modelling, Elsevier, vol. 27(3), pages 746-754, May.

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