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Optimal Licensing Policy in Differentiated Industries

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  • Nisvan Erkal

Abstract

This paper analyses the policy implications of licensing between producers of differentiated goods. We consider and compare two-part tariff, fixed fee, royalty and collusive licensing contracts. Under the optimal licensing policy, there will be no technology transfers if the innovation size is sufficiently small and degree of product differentiation is sufficiently low. On the other hand, licensing deals that involve drastic innovations are always socially desirable. In the limit, as product differentiation converges to zero, it becomes socially desirable to transfer drastic innovations only. The range of innovation sizes that is socially optimal to transfer increases as product differentiation increases.

Suggested Citation

  • Nisvan Erkal, 2004. "Optimal Licensing Policy in Differentiated Industries," Department of Economics - Working Papers Series 894, The University of Melbourne.
  • Handle: RePEc:mlb:wpaper:894
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    References listed on IDEAS

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    More about this item

    Keywords

    Patent licensing; product differentiation; antitrust policy;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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