Choosing the partners in the licensing alliance
I consider a situation in which the incumbent strategically adopts the licensing alliance, facing potential entrants. The queue of entrants consists of two firms, the 'strong' entrant and the 'weak' entrant, who differ in their productivities. The incumbent sets a licensing fee and offers it to the entrants. Each entrant decides whether or not to buy the licensing alliance. After the set of the licensing alliance is determined, they engage in the Cournot competition. I examine the optimal licensing fee, and show that the optimal licensing fee is to charge a discriminatory royalty to each licensee. I also examine the licensing policy on the partner(s): To whom should the licensor license its technology? By comparing the equilibrium expected payoffs for the licensor, I show that licensing to both entrants would be preferred to licensing to a single entrant. But, if the licensor faces the problem on choosing the partner, he prefers the licensing of the weak entrant to the strong entrant. Copyright © 2006 John Wiley & Sons, Ltd.
Volume (Year): 27 (2006)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fauli-Oller, Ramon & Sandonis, Joel, 2002.
"Welfare reducing licensing,"
Games and Economic Behavior,
Elsevier, vol. 41(2), pages 192-205, November.
- Ramón Faulí-Oller & Joel Sandonís, 2000. "Welfare Reducing Licensing," Working Papers. Serie AD 2000-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Almeida Costa, Luis & Dierickx, Ingemar, 2002. "Licensing and bundling," International Journal of Industrial Organization, Elsevier, vol. 20(2), pages 251-267, February.
- Morton I. Kamien & Yair Tauman, 1986. "Fees Versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 471-491.
- Morton I. Kamien & Yair Tauman, 1984. "Fees Versus Royalties and the Private Value of a Patent," Discussion Papers 583, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Barla, Philippe, 2000. "Firm size inequality and market power," International Journal of Industrial Organization, Elsevier, vol. 18(5), pages 693-722, July.
- Barla, Philippe, 1997. "Firm Size Inequality and Market Power," Cahiers de recherche 9714, Université Laval - Département d'économique.
- Choi, Jay Pil, 2001. "Technology transfer with moral hazard," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 249-266, January.
- Choi, Jay Pil, 1996. "Technology Transfer with Moral Hazard," Economics Series 22, Institute for Advanced Studies.
- Michael L. Katz & Carl Shapiro, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 567-589.
- Katharine E. Rockett, 1990. "Choosing the Competition and Patent Licensing," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 161-171, Spring.
- Nancy T. Gallini & Brian D. Wright, 1990. "Technology Transfer under Asymmetric Information," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 147-160, Spring.
- Bousquet, Alain & Cremer, Helmuth & Ivaldi, Marc & Wolkowicz, Michel, 1998. "Risk sharing in licensing," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 535-554, September.
- Pastor, Maite & Sandonis, Joel, 2002. "Research joint ventures vs. cross licensing agreements: an agency approach," International Journal of Industrial Organization, Elsevier, vol. 20(2), pages 215-249, February.
- Lin, Ping, 1996. "Fixed-Fee Licensing of Innovations and Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 443-449, December.
- Sang-Seung Yi, 1998. "Whom to license patented technology," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 19(3), pages 189-195. Full references (including those not matched with items on IDEAS)