IDEAS home Printed from https://ideas.repec.org/a/spr/series/v15y2024i2d10.1007_s13209-023-00295-x.html
   My bibliography  Save this article

Sequential licensing with several competing technologies

Author

Listed:
  • Ramon Fauli-Oller

    (Universidad de Alicante)

  • Miguel González-Maestre

    (Universidad de Murcia)

Abstract

We assume a multistage oligopoly wherein a given number of innovators compete by selling their substitutive technologies. Each innovator sequentially and independently chooses how many licenses to sell, and subsequently, all licensees compete à la Cournot in the product market. We show that, in equilibrium, the total number of licensees grows exponentially with the number of innovators. In addition, this sequential outcome is also obtained as a subgame perfect Nash equilibrium in pure strategies of a game with endogenous timing. Interestingly, by extending the duopoly model of Badia et al. (Math Soc Sci 108:8–13, 2020) to the case of more than two innovators and exploring pure strategy equilibria instead of mixed strategy equilibria, we derive drastically different policy implications, in terms of patent regulations. Our results suggest that more competition in the upstream market (e.g., by relaxing patent protection against the appearance of similar technologies) tends to increase downstream competition and welfare instead of discouraging or delaying technology adoption. In addition, our analysis is extended to explore the strategic role of public investment in basic R &D.

Suggested Citation

  • Ramon Fauli-Oller & Miguel González-Maestre, 2024. "Sequential licensing with several competing technologies," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 15(2), pages 179-201, June.
    • Handle: RePEc:spr:series:v:15:y:2024:i:2:d:10.1007_s13209-023-00295-x
    DOI: 10.1007/s13209-023-00295-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s13209-023-00295-x
    File Function: Abstract
    Download Restriction: no
    File URL: https://libkey.io/10.1007/s13209-023-00295-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Morton I. Kamien & Yair Tauman, 1986. "Fees Versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(3), pages 471-491.
    2. Michael L. Katz & Carl Shapiro, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(3), pages 567-589.
    3. Badia, Bruno D. & Tauman, Yair & Tumendemberel, Biligbaatar, 2020. "On the diffusion of competing innovations," Mathematical Social Sciences, Elsevier, vol. 108(C), pages 8-13.
    4. García-Vega, María & Vicente-Chirivella, Óscar, 2020. "Do university technology transfers increase firms’ innovation?," European Economic Review, Elsevier, vol. 123(C).
    5. 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.
    6. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
    7. Baye, Michael R & Crocker, Keith J & Ju, Jiandong, 1996. "Divisionalization, Franchising, and Divestiture Incentives in Oligopoly," American Economic Review, American Economic Association, vol. 86(1), pages 223-236, March.
    8. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
    9. 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.
    10. Iain M. Cockburn & Rebecca M. Henderson, 2001. "Publicly Funded Science and the Productivity of the Pharmaceutical Industry," NBER Chapters, in: Innovation Policy and the Economy, Volume 1, pages 1-34, National Bureau of Economic Research, Inc.
    11. Corchon, Luis C. & Gonzalez-Maestre, Miguel, 2000. "On the competitive effects of divisionalization," Mathematical Social Sciences, Elsevier, vol. 39(1), pages 71-79, January.
    12. Miguel González-Maestre & Luis M. Granero, 2013. "Basic Research And Development In Vertical Markets," Manchester School, University of Manchester, vol. 81(3), pages 258-275, June.
    13. Ramon Faulí-Oller & Xulia González & Joel Sandonís, 2013. "Optimal Two-Part Tariff Licensing Contracts With Differentiated Goods And Endogenous R&D," Manchester School, University of Manchester, vol. 81(5), pages 803-827, September.
    14. Gonzalez-Maestre, Miguel, 2001. "Divisionalization with spatial differentiation," International Journal of Industrial Organization, Elsevier, vol. 19(8), pages 1297-1313, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Luca Lambertini & Giuseppe Pignataro, 2019. "On the social (sub)optimality of divisionalization under product differentiation," Journal of Economics, Springer, vol. 128(3), pages 225-238, December.
    2. Rey, Patrick & Salant, David, 2012. "Abuse of dominance and licensing of intellectual property," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 518-527.
    3. Filippini Luigi & Vergari Cecilia, 2017. "Vertical Integration Smooths Innovation Diffusion," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(3), pages 1-22, July.
    4. Muthers, Johannes & Inceoglu, Firat & Doganoglu, Toker, 2013. "Licensing with Free Entry," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79757, Verein für Socialpolitik / German Economic Association.
    5. Sen, Debapriya & Tauman, Yair, 2018. "Patent licensing in a Cournot oligopoly: General results," Mathematical Social Sciences, Elsevier, vol. 96(C), pages 37-48.
    6. Antelo, Manel & Bru, Lluís, 2024. "On the size of innovation and selling versus licensing," MPRA Paper 122731, University Library of Munich, Germany.
    7. Creane, Anthony & Ko, Chiu Yu & Konishi, Hideo, 2013. "Choosing a licensee from heterogeneous rivals," Games and Economic Behavior, Elsevier, vol. 82(C), pages 254-268.
    8. Sánchez, M. & Nerja, A., 2024. "The role of asymmetric innovation’s sizes in technology licensing under partial vertical integration," Research in Economics, Elsevier, vol. 78(2).
    9. Can Erutku & Yves Richelle, 2009. "Licensing a technological headstart," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 18(3), pages 225-242.
    10. Marta San Martín & Ana I. Saracho, 2015. "Optimal Two-part Tariff Licensing Mechanisms," Manchester School, University of Manchester, vol. 83(3), pages 288-306, June.
    11. Siyu Ma & Debapriya Sen & Yair Tauman, 2024. "Optimal patent licensing: from three to two part tariffs," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(4), pages 1233-1273, December.
    12. Debapriya Sen & Giorgos Stamatopoulos, 2009. "Technology Transfer Under Returns To Scale," Manchester School, University of Manchester, vol. 77(3), pages 337-365, June.
    13. Xue, Minggao & Su, Lili, 2011. "Licensing to a durable-good duopoly in patent litigation," Economic Modelling, Elsevier, vol. 28(3), pages 1186-1194, May.
    14. Jean-Etienne de Bettignies & Hua Fang Liu & David T. Robinson & Bulat Gainullin, 2023. "Competition and Innovation in Markets for Technology," Management Science, INFORMS, vol. 69(8), pages 4753-4773, August.
    15. L. Filippini & C. Vergari, 2012. "Product innovation in a vertically differentiated model," Working Papers wp833, Dipartimento Scienze Economiche, Universita' di Bologna.
    16. Tsung-Sheng Tsai & Cheng-Tai Wu, 2022. "Optimal licensing contracts with a downstream oligopoly: insider versus outsider innovation," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 10(1), pages 147-165, May.
    17. C. Erutku & A. Priegue Freire & Y. Richelle, 2007. "Licensing Innovations with Exclusive Contracts," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 31(4), pages 261-273, December.
    18. Kishimoto, Shin & Watanabe, Naoki & Muto, Shigeo, 2011. "Bargaining outcomes in patent licensing: Asymptotic results in a general Cournot market," Mathematical Social Sciences, Elsevier, vol. 61(2), pages 114-123, March.
    19. Elias Carayannis & Igor Dubina & Alina Ilinova, 2015. "Licensing in the Context of Entrepreneurial University Activity: an Empirical Evidence and a Theoretical Model," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 6(1), pages 1-12, March.
    20. Gangopadhyay Shubhashis & Mallios Aineas & Sjögren Stefan, 2023. "Collusive Bidding, Competition Law, and Welfare," Review of Law & Economics, De Gruyter, vol. 19(2), pages 213-231, July.

    More about this item

    Keywords

    Licensing; Sequentiality; Oligopoly; Competition; Technology adoption;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:series:v:15:y:2024:i:2:d:10.1007_s13209-023-00295-x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.