IDEAS home Printed from
   My bibliography  Save this paper

On Patent Licensing in Spatial Competition


  • Sougata Poddar

    () (National University of Singapore)

  • Uday Bhanu Sinha

    () (Indian Statistical Institute)


We consider the issue of patent licensing in a linear city framework where firms are located at the end points of the city and compete in price. We consider three types of licensing arrangements, namely, auction, fixed fee, royalty; and focus on the optimal licensing strategy of an outsider patentee as well as an insider patentee. Contrary to the findings in the existing literature, first we show offering royalty is the best for the patentee when the patentee is an outsider for both drastic and non-drastic innovation. For insider patentee, offering no-license is the best when the innovation is drastic, while royalty is optimal when the innovation is non-drastic. We find incentive for innovation is higher for an outsider patentee compared to an insider patentee. We also show that overall increase in welfare due to innovation is independent of the fact that the patentee is outsider or insider in each of the drastic and non-drastic case.

Suggested Citation

  • Sougata Poddar & Uday Bhanu Sinha, 2002. "On Patent Licensing in Spatial Competition," Departmental Working Papers wp0212, National University of Singapore, Department of Economics.
  • Handle: RePEc:nus:nusewp:wp0212

    Download full text from publisher

    File URL:
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    1. Choi, Jay Pil, 2001. "Technology transfer with moral hazard," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 249-266, January.
    2. 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.
    3. Wang, X. Henry, 1998. "Fee versus royalty licensing in a Cournot duopoly model," Economics Letters, Elsevier, vol. 60(1), pages 55-62, July.
    4. 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.
    5. Beggs, A. W., 1992. "The licensing of patents under asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 10(2), pages 171-191, June.
    6. Kamien, Morton I & Tauman, Yair, 2002. "Patent Licensing: The Inside Story," Manchester School, University of Manchester, vol. 70(1), pages 7-15, January.
    7. Oz Shy, 1996. "Industrial Organization: Theory and Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262691795, January.
    8. Kamien, Morton I. & Oren, Shmuel S. & Tauman, Yair, 1992. "Optimal licensing of cost-reducing innovation," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 483-508.
    9. Muto Shigeo, 1993. "On Licensing Policies in Bertrand Competition," Games and Economic Behavior, Elsevier, vol. 5(2), pages 257-267, April.
    10. 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.
    11. Oz Shy & Jacques-Françlois Thisse, 1999. "A Strategic Approach to Software Protection," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(2), pages 163-190, June.
    12. Sougata Poddar & Uday Bhanu Sinha, 2002. "The Role of Fixed Fee and Royalty in Patent Licensing," Departmental Working Papers wp0211, National University of Singapore, Department of Economics.
    13. Kamien, Morton I., 1992. "Patent licensing," Handbook of Game Theory with Economic Applications,in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 11, pages 331-354 Elsevier.
    Full references (including those not matched with items on IDEAS)

    More about this item


    licensing; auction; fixed fee; royalty; price competition;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:nus:nusewp:wp0212. 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: (). General contact details of provider: .

    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.