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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
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    References listed on IDEAS

    as
    1. Arora, Ashish & Fosfuri, Andrea, 2003. "Licensing the market for technology," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 277-295, October.
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    Full references (including those not matched with items on IDEAS)

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    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

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