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Licensing under convex costs

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  • Arijit Mukherjee

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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    20. Mukherjee, Arijit & Pennings, Enrico, 2006. "Tariffs, licensing and market structure," European Economic Review, Elsevier, vol. 50(7), pages 1699-1707, October.
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    Cited by:

    1. Sun, Chia-Hung, 2023. "Timing of technology adoption in the presence of patent licensing," Economic Modelling, Elsevier, vol. 127(C).
    2. Stefano Colombo & Luigi Filippini, 2016. "Revenue royalties," Journal of Economics, Springer, vol. 118(1), pages 47-76, May.
    3. Arijit Mukherjee, 2020. "Optimal Licensing Contract: The Implications of Preference Function," Arthaniti: Journal of Economic Theory and Practice, , vol. 19(1), pages 61-67, June.
    4. 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.
    5. Ramon Fauli‐Oller & Joel Sandonís, 2022. "Fee versus royalty licensing in a Cournot duopoly with increasing marginal costs," Manchester School, University of Manchester, vol. 90(4), pages 439-452, July.

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    More about this item

    Keywords

    Licensing; Innovation; Convex cost; Auction; Royalty; D21; D43; D45; L13;
    All these keywords.

    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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