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A Macroeconomic Model of Imperfect Competition with Patent Licensing

Author

Listed:
  • Hsieh Hui-ting

    (Department of Economics, National Chung Cheng University, Minhsiung, Chiayi 621, Taiwan)

  • Lai Ching-chong

    (Academia Sinica, Taipei, Taiwan; National Cheng Chi University, Taipei, Taiwan)

  • Chen Kuan-jen

    (Department of Economics, Fu-Jen Catholic University, New Taipei, Taiwan)

Abstract

This paper sets up an imperfectly competitive macroeconomic model that features the strategic interaction between the patent-holding firm and licensees, and uses it to analyze the relevant macro-variables under various licensing arrangements. Some main findings emerge from the analysis. First, the equilibrium aggregate output and aggregate consumption under fixed-fee and royalty licensing regimes are always greater than those under the no licensing regime. Moreover, the equilibrium aggregate output and consumption under the fixed-fee licensing regime are always greater than those under the royalty licensing regime. Second, with the higher (lower) technology level the patent holder prefers the fixed-fee (royalty) contract. Third, welfare could be improved through technology transfer, and the level of welfare under the fixed-fee licensing regime is higher than that under the royalty licensing regime. Lastly, this paper discusses some extensions of the baseline model.

Suggested Citation

  • Hsieh Hui-ting & Lai Ching-chong & Chen Kuan-jen, 2015. "A Macroeconomic Model of Imperfect Competition with Patent Licensing," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(4), pages 1579-1618, October.
    • Handle: RePEc:bpj:bejeap:v:15:y:2015:i:4:p:1579-1618:n:2
    DOI: 10.1515/bejeap-2013-0144
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    Keywords

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    JEL classification:

    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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