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Technology licensing under convex costs

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  • Arijit Mukherjee

Abstract

The technology licensing literature has completely dominated by the assumption of constant returns to scale technology, while the implications of convex costs have been discussed extensively in the Industrial Organization literature or in the Microeconomics literature, in general. We show that an “outside innovator” and the society may prefer royalty licensing compared to auction (or fixed-fee licensing) under convex costs. There can also be conflicting interests between the innovator and the society about the preferred licensing contract. However, the consumers always prefer auction. It follows from our analysis that a combination of royalty and fixedfee can dominate both auction (of fixed-fee licensing) and royalty only licensing.

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Bibliographic Info

Paper provided by University of Nottingham, School of Economics in its series Discussion Papers with number 10/05.

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Handle: RePEc:not:notecp:10/05

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Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
Phone: (44) 0115 951 5620
Fax: (0115) 951 4159
Web page: http://www.nottingham.ac.uk/economics/
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Related research

Keywords: Auction; Convex cost; Fixed-fee; Licensing; Royalty;

References

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  10. repec:ebl:ecbull:v:12:y:2007:i:3:p:1-6 is not listed on IDEAS
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  17. Sougata Poddar & Uday Bhanu Sinha, 2002. "The Role of Fixed Fee and Royalty in Patent Licensing," Departmental Working Papers wp0211, National University of Singapore, Department of Economics.
  18. Kamien, Morton I. & Tauman, Yair & Zang, Israel, 1988. "Optimal license fees for a new product," Mathematical Social Sciences, Elsevier, vol. 16(1), pages 77-106, August.
  19. Beggs, A. W., 1992. "The licensing of patents under asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 10(2), pages 171-191, June.
  20. Wang, X. Henry, 1998. "Fee versus royalty licensing in a Cournot duopoly model," Economics Letters, Elsevier, vol. 60(1), pages 55-62, July.
  21. Kamien, Morton I & Tauman, Yair, 1986. "Fees versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 471-91, August.
  22. Bousquet, Alain & Cremer, Helmuth & Ivaldi, Marc & Wolkowicz, Michel, 1998. "Risk sharing in licensing," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 535-554, September.
  23. Kamien, Morton I & Tauman, Yair, 2002. "Patent Licensing: The Inside Story," Manchester School, University of Manchester, vol. 70(1), pages 7-15, January.
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