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Intra-brand patent licensing with inter-brand competition

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  • Cao, Jiyun
  • Sinha, Uday Bhanu

Abstract

The existing literature has considered licensing of a patented cost-reducing innovation either in a homogeneous good industry or in a differentiated goods industry. We consider a new model of patent licensing between producers of a homogeneous good when there is competition from producers of another brand in the market. We find that for drastic innovation, the optimal intra-brand patent licensing involves only fixed fee when the degree of inter-brand differentiation is low and a two-part tariff otherwise. For non-drastic innovation, the optimal intra-brand patent licensing involves only royalty when the degree of inter-brand differentiation is high, a two-part tariff when it is intermediate, and finally a fixed fee alone when it is low. We also establish that the innovator has more incentive for innovation as an insider than an outsider of this market.

Suggested Citation

  • Cao, Jiyun & Sinha, Uday Bhanu, 2020. "Intra-brand patent licensing with inter-brand competition," Mathematical Social Sciences, Elsevier, vol. 104(C), pages 71-77.
    • Handle: RePEc:eee:matsoc:v:104:y:2020:i:c:p:71-77
    DOI: 10.1016/j.mathsocsci.2020.01.001
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    References listed on IDEAS

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    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    2. 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.
    3. 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.
    4. 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.
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    Cited by:

    1. Jiyun Cao & Arijit Mukherjee, 2024. "Foreign Direct Investment and Technology Licensing in a Polluting Industry," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 87(9), pages 2361-2399, September.

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