Licensing of a lower-cost production process to an asymmetric Cournot duopoly
An outside inventor of a new production process seeks to license it to Cournot duopolists which have unequal ex ante costs. Distinguishing "leading-edge" innovations (new cost below both firms' costs) from "catch-up" innovations (new cost between the two firms' costs), we compare the equilibria of two license-selling mechanisms: exclusive license auction and non-exclusive price-setting. In contrast to the often-studied case of an innovation that reduces the cost of any licensee by the same amount, we show that licensing of a new process may attenuate the ex ante cost asymmetry, allow the inefficient firm to leapfrog its competitor, and raise the licensee's net profits.
|Date of creation:||Jan 2009|
|Date of revision:|
|Publication status:||Published in Gakushuin Economic Papers 4.45(2009): pp. 325-336|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
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.:
- Shapiro, Carl, 1985. "Patent Licensing and R&D Rivalry," American Economic Review, American Economic Association, vol. 75(2), pages 25-30, May.
- Morton I. Kamien & Yair Tauman, 1984.
"Fees Versus Royalties and the Private Value of a Patent,"
583, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Kamien, Morton I & Tauman, Yair, 1986. "Fees versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 471-91, August.
- Katz, Michael L & Shapiro, Carl, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 567-89, August.
- 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.
- Debapriya Sen & Yair Tauman, 2002. "General licensing schemes for a cost-reducing innovation," Department of Economics Working Papers 02-03, Stony Brook University, Department of Economics.
- Jorge Aseff & Hector Chade, 2008.
"An optimal auction with identity-dependent externalities,"
RAND Journal of Economics,
RAND Corporation, vol. 39(3), pages 731-746.
- Hector Chade & Jorge Aseff, . "An Optimal Auction with Identity-Dependent Externalities," Working Papers 2133477, Department of Economics, W. P. Carey School of Business, Arizona State University.
- Jorge Aseff & Hector Chade, 2004. "An optimal auction with identity-dependent externalities," Econometric Society 2004 Latin American Meetings 254, Econometric Society.
- Wang, X. Henry, 1998. "Fee versus royalty licensing in a Cournot duopoly model," Economics Letters, Elsevier, vol. 60(1), pages 55-62, July.
- Funk, Peter, 1996. "Auctions with Interdependent Valuations," International Journal of Game Theory, Springer, vol. 25(1), pages 51-64.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:23017. 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: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.