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Optimal Licensing Policy in Differentiated Industries

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Author Info
Nisvan Erkal

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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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File URL: http://www.economics.unimelb.edu.au/SITE/research/workingpapers/wp04/894.pdf
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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
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Handle: RePEc:mlb:wpaper:894

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Related research
Keywords: Patent licensing; product differentiation; antitrust policy;

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Find related papers by JEL classification:
D4 - Microeconomics - - Market Structure and Pricing
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
O38 - Economic Development, Technological Change, and Growth - - Technological Change - - - Government Policy

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  4. Lin, Ping, 1996. "Fixed-Fee Licensing of Innovations and Collusion," Journal of Industrial Economics, Blackwell Publishing, vol. 44(4), pages 443-49, December. [Downloadable!] (restricted)
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  17. Katz, Michael L & Shapiro, Carl, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 567-89, August. [Downloadable!] (restricted)
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  1. Nisvan Erkal, 2004. "Optimal Licensing Policy in Differentiated Industries," Department of Economics - Working Papers Series 894, The University of Melbourne. [Downloadable!]
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