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Patent Licensing By Means Of An Auction: Internal Vs. External Patentee

Author

Listed:
  • Ramón Faulí-Oller

    (Universidad de Alicante)

  • Joel Sandonís

    (Universidad de Alicante)

Abstract

An independent research laboratory owns a patented process innovation that can be licensed by means of an auction to two Cournot duopolists producing differentiated goods. For large innovations and close enough substitute goods the patentee auctions o¤ only one license, preventing the full diffusion of the innovation. For this range of parameters, however, if the laboratory merged with one of the firms in the industry, full technology diffusion would be implemented as the merged entity would always license the innovation to the rival firm. This explains that, in this context, a vertical merger is both profitable and welfare improving.

Suggested Citation

  • Ramón Faulí-Oller & Joel Sandonís, 2007. "Patent Licensing By Means Of An Auction: Internal Vs. External Patentee," Working Papers. Serie AD 2007-09, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:2007-09
    as

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2007-09.pdf
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    References listed on IDEAS

    as
    1. Sandonis, Joel & Fauli-Oller, Ramon, 2006. "On the competitive effects of vertical integration by a research laboratory," International Journal of Industrial Organization, Elsevier, vol. 24(4), pages 715-731, July.
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    More about this item

    Keywords

    Patent licensing; two-part tariff contracts; vertical mergers;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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