IDEAS home Printed from https://ideas.repec.org/a/bpj/bejtec/v17y2017i1p35n8.html
   My bibliography  Save this article

Technology Licensing between Rival Firms in Presence of Asymmetric Information

Author

Listed:
  • Sen Neelanjan

    (Department of Commerce, St. Xavier’s College, 30 Mother Teresa Sarani, Kolkata-700016, India)

  • Bhattacharya Sukanta

    (Department of Economics, University of Calcutta, 56A, B.T. Road, Kolkata-700050, India)

Abstract

This paper investigates the possibility of licensing between rival firms in a Cournot duopoly market. Unlike Heywood, Li, and Ye (2014. “Per Unit vs. Ad Valorem Royalties under Asymmetric Information.” International Journal of Industrial Organization 37:38–46), the cost information of the licensee is private in the pre-licensing stage. If inspection of the licensee’s technology is not possible by the licensor i) technology is never transferred from the low-cost firm (licensor) to the high-cost firm (licensee) via fixed-fee and ii) in the case of royalty licensing technology will be transferred only if the cost difference between the firms is sufficiently high. Moreover, under fixed-fee and royalty licensing, the licensee will always allow the licensor to inspect its technology, if inspection is possible. If inspection is undertaken by the licensor, technology will be transferred i) if the cost difference is low via fixed fee and ii) always via royalty.

Suggested Citation

  • Sen Neelanjan & Bhattacharya Sukanta, 2017. "Technology Licensing between Rival Firms in Presence of Asymmetric Information," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 17(1), pages 1-35, January.
    • Handle: RePEc:bpj:bejtec:v:17:y:2017:i:1:p:35:n:8
    DOI: 10.1515/bejte-2015-0097
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/bejte-2015-0097
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/bejte-2015-0097?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Vishwasrao, Sharmila, 2007. "Royalties vs. fees: How do firms pay for foreign technology?," International Journal of Industrial Organization, Elsevier, vol. 25(4), pages 741-759, August.
    2. Henry Wang, X., 2002. "Fee versus royalty licensing in a differentiated Cournot duopoly," Journal of Economics and Business, Elsevier, vol. 54(2), pages 253-266.
    3. Heywood, John S. & Li, Jianpei & Ye, Guangliang, 2014. "Per unit vs. ad valorem royalties under asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 37(C), pages 38-46.
    4. Bessen, James, 2004. "Holdup and licensing of cumulative innovations with private information," Economics Letters, Elsevier, vol. 82(3), pages 321-326, March.
    5. Schmitz, Patrick W., 2002. "On Monopolistic Licensing Strategies under Asymmetric Information," Journal of Economic Theory, Elsevier, vol. 106(1), pages 177-189, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Swapnendu Banerjee & Arijit Mukherjee & Sougata Poddar, 2023. "Optimal patent licensing—Two or three‐part tariff," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 25(3), pages 624-648, June.
    2. Gui‐Hua Lin & Yang‐Ping Liu & Qi Zhang, 2024. "Strategic analysis of green technology unilateral licensing under carbon cap‐and‐trade policy," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(4), pages 2646-2665, June.
    3. Hong, Xianpei & Zhou, Menghuan & Gong, Yeming, 2021. "Dilemma of quality information disclosure in technology licensing," European Journal of Operational Research, Elsevier, vol. 294(2), pages 543-557.
    4. Cheng‐Tai Wu & Tsung‐Sheng Tsai, 2024. "Patent licensing for signaling the cost‐reduction innovation: The case of the insider innovator," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 26(1), February.
    5. Arijit Mukherjee & Aniruddha Bagchi, 2020. "Information Disclosure through Technology Licensing," Games, MDPI, vol. 11(3), pages 1-8, September.
    6. Lindblom Ted & Mallios Aineas & Sjögren Stefan, 2024. "A Theoretical Analysis of Collusion Involving Technology Licensing Under Diseconomies of Scale," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 24(1), pages 263-297, January.
    7. Liu Yao & Mukherjee Arijit, 2024. "Lobbying for Tariff Protection, International Technology Licensing and Consumer Surplus," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 24(1), pages 117-139, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kabiraj, Abhishek & Kabiraj, Tarun, 2017. "Tariff induced licensing contracts, consumers’ surplus and welfare," Economic Modelling, Elsevier, vol. 60(C), pages 439-447.
    2. Tatsuya Kitagawa & Yasushi Masuda & Masashi Umezawa, 2020. "Impact of technology development costs on licensing form in a differentiated Cournot duopoly," International Journal of Economic Theory, The International Society for Economic Theory, vol. 16(2), pages 153-166, June.
    3. Chien-Shu Tsai & Ting-Chung Tsai & Po-Sheng Ko & Chien-Hui Lee & Jen-Yao Lee & Yu-Lin Wang, 2019. "On the Sustainability of Technology Licensing Under Asymmetric Information Game," Sustainability, MDPI, vol. 11(24), pages 1-15, December.
    4. Kuang-Cheng Andy Wang & Dang-Long Bui & Yi-Jie Wang & Wen-Jung Liang, 2023. "International licensing under an endogenous tariff in vertically-related markets," Journal of Economics, Springer, vol. 139(2), pages 93-123, July.
    5. Arijit Mukherjee & Aniruddha Bagchi, 2020. "Information Disclosure through Technology Licensing," Games, MDPI, vol. 11(3), pages 1-8, September.
    6. Sen, Debapriya & Tauman, Yair, 2007. "General licensing schemes for a cost-reducing innovation," Games and Economic Behavior, Elsevier, vol. 59(1), pages 163-186, April.
    7. Sudipto Bhattacharya & Claude d’Aspremont & Sergei Guriev & Debapriya Sen & Yair Tauman, 2014. "Cooperation in R&D: Patenting, Licensing, and Contracting," International Series in Operations Research & Management Science, in: Kalyan Chatterjee & William Samuelson (ed.), Game Theory and Business Applications, edition 2, chapter 0, pages 265-286, Springer.
    8. Jiyun Cao & Arijit Mukherjee, 2017. "Market Power of the Input Supplier, Technology Transfer and Consumer Welfare," Manchester School, University of Manchester, vol. 85(4), pages 430-449, July.
    9. Fan, Cuihong & Jun, Byoung Heon & Wolfstetter, Elmar G., 2018. "Per unit vs. ad valorem royalty licensing," Economics Letters, Elsevier, vol. 170(C), pages 71-75.
    10. Neelanjan Sen, 2015. "Technology transfer and its effect on innovation," Economics Bulletin, AccessEcon, vol. 35(4), pages 2523-2534.
    11. Cuihong Fan & Byoung Heon Jun & Elmar G. Wolfstetter, 2016. "Optimal Licensing of Non-Drastic and (Super-)Drastic Innovations: The Case of the Inside Patent Holder," Discussion Paper Series 1610, Institute of Economic Research, Korea University.
    12. Antelo, Manel & Bru, Lluís, 2024. "Licensing of a cost-reducing innovation in a Stackelberg-differentiated duopoly," Economic Modelling, Elsevier, vol. 141(C).
    13. Cheng-Tai Wu & Cheng-Hau Peng & Tsung-Sheng Tsai, 2021. "Signaling in Technology Licensing with a Downstream Oligopoly," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(4), pages 531-559, June.
    14. Yan, Qingyou & Yang, Le, 2018. "Optimal licensing schemes for a mixed ownership firm when facing uncertain R&D outcomes and technology spillover," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 550-572.
    15. Poddar, Sougata & Bouguezzi, Fehmi, 2011. "Patent licensing in spatial competition: Does pre-innovation cost asymmetry matter?," MPRA Paper 32764, University Library of Munich, Germany.
    16. Kim, Seung-Leul & Lee, Sang-Ho, 2021. "Optimal tariffs with emissions taxes under non-restrictive two-part licensing strategies by a foreign eco-competitor," MPRA Paper 108496, University Library of Munich, Germany.
    17. Gelves, Juan Alejandro & Heywood, John S., 2016. "How does a mixed ownership firm license a patent?," Economic Modelling, Elsevier, vol. 59(C), pages 278-284.
    18. Bouguezzi, Fehmi & EL ELJ, Moez, 2009. "Vertical Integration and Patent Licensing in Upstream and Downstream Markets," MPRA Paper 22212, University Library of Munich, Germany.
    19. Arman Yalvac Aksoy & Catherine Beaudry, 2021. "How are companies paying for university research licenses? Empirical evidence from university-firm technology transfer," The Journal of Technology Transfer, Springer, vol. 46(6), pages 2051-2121, December.
    20. Liu Liu & Ying Yuan & Xiaoya Wang & Hongfu Huang, 2022. "Strategic Licensing of Green Technologies to a Brown Rival: A Game Theoretical Analysis," Mathematics, MDPI, vol. 10(23), pages 1-21, November.

    More about this item

    Keywords

    technology licensing; cournot competition; asymmetry information;
    All these keywords.

    JEL classification:

    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:17:y:2017:i:1:p:35:n:8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyterbrill.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.