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Licensing a technology standard

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  • Miao, Chun-Hui

Abstract

I examine the optimal licensing strategy of the owner of a proprietary technology standard in a monopolistically competitive industry. The standard owner can be either an outsider inventor or a joint venture of downstream firms. I find that (1) a simple revenue royalty replicates the integrated monopoly outcome; (2) a patent pool cannot do better than adopting a non-discriminatory licensing policy that offers higher royalty rates to pool members than to nonmembers; (3) if the standard owner also sells a complementary good, then it may choose a decentralized marketplace as a commitment not to maximize licensing revenue. Implications to the use of RAND pricing in standard settings are discussed.

Suggested Citation

  • Miao, Chun-Hui, 2016. "Licensing a technology standard," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 33-61.
  • Handle: RePEc:eee:indorg:v:47:y:2016:i:c:p:33-61
    DOI: 10.1016/j.ijindorg.2016.02.001
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    References listed on IDEAS

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    Cited by:

    1. Jens Leth Hougaard & Chiu Yu Ko & Xuyao Zhang, 2017. "A Welfare Economic Interpretation of FRAND," IFRO Working Paper 2017/04, University of Copenhagen, Department of Food and Resource Economics.

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    More about this item

    Keywords

    Licensing; Monopolistic competition; Patent pool; Royalty; Technology standard; Vertical control;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • G2 - Financial Economics - - Financial Institutions and Services

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