IDEAS home Printed from https://ideas.repec.org/p/boc/bocoec/779.html
   My bibliography  Save this paper

Choosing a Licensee from Heterogeneous Rivals

Author

Listed:
  • Anthony Creane

    (Michigan State University)

  • Chiu Yu Ko

    (National University of Singapore)

  • Hideo Konishi

    () (Boston College)

Abstract

We examine a firm that can license its production technology to a rival when firms are heterogeneous in production costs. We show that a complete technology transfer from one firm to another always increases joint profit under weakly concave demand when at least three firms remain in the industry. A jointly profitable transfer may reduce social welfare, although a jointly profitable transfer from the most efficient firm always increases welfare. We also consider two auction games under complete information: a standard first-price auction and a menu auction by Bernheim and Whinston (1986). With natural refinement of equilibria, we show that the resulting licensees are ordered by degree of efficiency: menu auction, simple auction, and joint-profit maximizing licensees, in (weakly) descending order.

Suggested Citation

  • Anthony Creane & Chiu Yu Ko & Hideo Konishi, 2011. "Choosing a Licensee from Heterogeneous Rivals," Boston College Working Papers in Economics 779, Boston College Department of Economics, revised 06 Apr 2013.
  • Handle: RePEc:boc:bocoec:779
    as

    Download full text from publisher

    File URL: http://fmwww.bc.edu/EC-P/wp779.pdf
    File Function: main text
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Federico Etro, 2006. "Aggressive leaders," RAND Journal of Economics, RAND Corporation, vol. 37(1), pages 146-154, March.
    2. 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.
    3. Zhao, Jingang, 2001. "A characterization for the negative welfare effects of cost reduction in Cournot oligopoly," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 455-469, March.
    4. Anthony Creane & Hideo Konishi, 2009. "Goldilocks and the Licensing Firm: Choosing a Partner when Rivals are Heterogeneous," Boston College Working Papers in Economics 720, Boston College Department of Economics.
    5. 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.
    6. Anthony Creane & Hideo Konishi, 2007. "The Unilateral Incentives for Technology Transfers: Predation by Proxy (and Deterrence)," Boston College Working Papers in Economics 677, Boston College Department of Economics, revised 19 Jun 2008.
    7. Shapiro, Carl, 1985. "Patent Licensing and R&D Rivalry," American Economic Review, American Economic Association, pages 25-30.
    8. Giebe, Thomas & Wolfstetter, Elmar, 2008. "License auctions with royalty contracts for (winners and) losers," Games and Economic Behavior, Elsevier, vol. 63(1), pages 91-106, May.
    9. Katharine E. Rockett, 1990. "Choosing the Competition and Patent Licensing," RAND Journal of Economics, The RAND Corporation, pages 161-171.
    10. Philippe Jehiel & Benny Moldovanu, 2000. "Auctions with Downstream Interaction Among Buyers," RAND Journal of Economics, The RAND Corporation, pages 768-791.
    11. Jehiel, Philippe & Moldovanu, Benny & Stacchetti, Ennio, 1996. "How (Not) to Sell Nuclear Weapons," American Economic Review, American Economic Association, pages 814-829.
    12. Philippe Jehiel & Benny Moldovanu, 2000. "Auctions with Downstream Interaction Among Buyers," RAND Journal of Economics, The RAND Corporation, pages 768-791.
    13. 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.
    14. Michael L. Katz & Carl Shapiro, 1985. "On the Licensing of Innovations," RAND Journal of Economics, The RAND Corporation, pages 504-520.
    15. Lahiri, Sajal & Ono, Yoshiyasu, 1988. "Helping Minor Firms Reduces Welfare," Economic Journal, Royal Economic Society, vol. 98(393), pages 1199-1202, December.
    16. Stamatopoulos, Giorgos & Tauman, Tami, 2009. "On the superiority of fixed fee over auction in asymmetric markets," Games and Economic Behavior, Elsevier, vol. 67(1), pages 331-333, September.
    17. B. Douglas Bernheim & Michael D. Whinston, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 1-31.
    18. Chun-Hui Miao, 2013. "On The Superiority Of Fixed Fee Over Auction In Technology Licensing," Manchester School, University of Manchester, vol. 81(3), pages 324-331, June.
    19. La Manna, Manfredi M A, 1993. "Asymmetric Oligopoly and Technology Transfers," Economic Journal, Royal Economic Society, vol. 103(417), pages 436-443, March.
    20. Baye, Michael R & Crocker, Keith J & Ju, Jiandong, 1996. "Divisionalization, Franchising, and Divestiture Incentives in Oligopoly," American Economic Review, American Economic Association, pages 223-236.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    licensing; production costs; technology transfer; auction games;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • L4 - Industrial Organization - - Antitrust Issues and Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:boc:bocoec:779. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F Baum). General contact details of provider: http://edirc.repec.org/data/debocus.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.