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Patent licensing in spatial models

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  • Lu, Yuanzhu
  • Poddar, Sougata

Abstract

We show that a two-part tariff licensing contract is always optimal to the insider patentee in spatial models irrespective of the size of the innovation or any pre-innovation cost asymmetries. The result provides a simple justification of the prevalence of two-part tariff licensing contracts in industries.

Suggested Citation

  • Lu, Yuanzhu & Poddar, Sougata, 2014. "Patent licensing in spatial models," Economic Modelling, Elsevier, vol. 42(C), pages 250-256.
    • Handle: RePEc:eee:ecmode:v:42:y:2014:i:c:p:250-256
    DOI: 10.1016/j.econmod.2014.06.016
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    References listed on IDEAS

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    1. Fauli-Oller, Ramon & Sandonis, Joel, 2002. "Welfare reducing licensing," Games and Economic Behavior, Elsevier, vol. 41(2), pages 192-205, November.
    2. Sougata Poddar & Uday Bhanu Sinha, 2004. "On Patent Licensing in Spatial Competition," The Economic Record, The Economic Society of Australia, vol. 80(249), pages 208-218, June.
    3. 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.
    4. Francisco Caballero-Sanz & Rafael Moner-Colonques & José J. Sempere-Monerris, 2002. "Optimal Licensing in a Spatial Model," Annals of Economics and Statistics, GENES, issue 66, pages 257-279.
    5. Sougata Poddar & Uday Bhanu Sinha, 2010. "Patent Licensing from a High‐Cost Firm to a Low‐Cost Firm," The Economic Record, The Economic Society of Australia, vol. 86(274), pages 384-395, September.
    6. Mukherjee, Arijit & Balasubramanian, N., 2001. "Technology transfer in a horizontally differentiated product market," Research in Economics, Elsevier, vol. 55(3), pages 257-274, September.
    7. Bagchi, Aniruddha & Mukherjee, Arijit, 2014. "Technology licensing in a differentiated oligopoly," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 455-465.
    8. Toshihiro Matsumura & Noriaki Matsushima, 2007. "On patent licensing in spatial competition with endogenous location choice," Discussion Papers 2007-35, Kobe University, Graduate School of Business Administration.
    9. Kamien, Morton I., 1992. "Patent licensing," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 11, pages 331-354, Elsevier.
    10. Macho-Stadler, Ines & Martinez-Giralt, Xavier & David Perez-Castrillo, J., 1996. "The role of information in licensing contract design," Research Policy, Elsevier, vol. 25(1), pages 43-57, January.
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    Citations

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    Cited by:

    1. Chennak, Ahmed & Giannakas, Konstantinos, 2023. "Licensing in the agri-food system: The role of cooperatives," 2023 Annual Meeting, July 23-25, Washington D.C. 335916, Agricultural and Applied Economics Association.
    2. Zou, Yuxiang & Chen, Tai-Liang, 2020. "Quality differentiation and product innovation licensing," Economic Modelling, Elsevier, vol. 87(C), pages 372-382.
    3. Banerjee, Swapnendu & Poddar, Sougata, 2019. "‘To sell or not to sell’: Licensing versus selling by an outside innovator," Economic Modelling, Elsevier, vol. 76(C), pages 293-304.
    4. Chin-Sheng Chen, 2017. "Endogenous Market Structure and Technology Licensing," The Japanese Economic Review, Japanese Economic Association, vol. 68(1), pages 115-130, March.
    5. 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.
    6. Yan, Qingyou & Yang, Le, 2018. "Optimal licensing in a differentiated Bertrand market under uncertain R&D outcomes and technology spillover," Economic Modelling, Elsevier, vol. 68(C), pages 117-126.
    7. Sinha, Uday Bhanu, 2016. "Optimal value of a patent in an asymmetric Cournot duopoly market," Economic Modelling, Elsevier, vol. 57(C), pages 93-105.
    8. Sougata Poddar & Swapnendu Banerjee & Monalisa Ghosh, 2021. "Technology transfer in spatial competition when licensees are asymmetric," Manchester School, University of Manchester, vol. 89(1), pages 24-45, January.
    9. 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.
    10. Li, Hai & Qing, Qiankai & Wang, Juan & Hong, Xianpei, 2021. "An analysis of technology licensing and parallel importation under different market structures," European Journal of Operational Research, Elsevier, vol. 289(1), pages 132-143.
    11. Chin-Sheng Chen, 2017. "Endogenous Market Structure and Technology Licensing," The Japanese Economic Review, Springer, vol. 68(1), pages 115-130, March.
    12. Kabiraj, Abhishek & Kabiraj, Tarun, 2017. "Tariff induced licensing contracts, consumers’ surplus and welfare," Economic Modelling, Elsevier, vol. 60(C), pages 439-447.

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    More about this item

    Keywords

    Salop model; Hotelling model; Cost-reducing innovation; Patent licensing;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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