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Licensing under convex costs

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  • Arijit Mukherjee

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Abstract

We show that both the outside and inside innovators license a new product (or drastic process innovation) to all potential licensees in the presence of convex costs, which occur under decreasing returns to scale technologies. An implication of our analysis is that a monopolist producer may prefer technology licensing in a homogeneous goods industry. We also show that an inside innovator’s incentive for innovation may be higher than that of an outside innovator. Copyright Springer-Verlag Wien 2014

Suggested Citation

  • Arijit Mukherjee, 2014. "Licensing under convex costs," Journal of Economics, Springer, vol. 111(3), pages 289-299, April.
  • Handle: RePEc:kap:jeczfn:v:111:y:2014:i:3:p:289-299 DOI: 10.1007/s00712-013-0333-9
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    References listed on IDEAS

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    1. San Martín, Marta & Saracho, Ana I., 2010. "Royalty licensing," Economics Letters, Elsevier, vol. 107(2), pages 284-287, May.
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    8. Can Erutku & Yves Richelle, 2007. "Optimal Licensing Contracts and the Value of a Patent," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 407-436, June.
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    Cited by:

    1. Stefano Colombo & Luigi Filippini, 2016. "Revenue royalties," Journal of Economics, Springer, pages 47-76.

    More about this item

    Keywords

    Licensing; Innovation; Convex cost; Auction; Royalty; D21; D43; D45; L13;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • 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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