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A Macroeconomic Model of Imperfect Competition with Patent Licensing

Author

Listed:
  • Hui-ting Hsieh

    (Department of Economics, National Chung Cheng University, Taiwan)

  • Ching-chong Lai

    (Institute of Economics, Academia Sinica, Taipei, Taiwan
    Department of Economics, National Cheng Chi University, Taiwan
    Institute of Economics, National Sun Yat-Sen University, Taiwan)

Abstract

This paper sets up an imperfectly competitive macroeconomic model that features the strategic interaction between the patent-holding firm and licensees, and uses it to analyze the relevant macro variables under various licensing arrangements. Some main findings emerge from the analysis. First, the equilibrium aggregate output and aggregate consumption under fixed-fee and royalty licensing regimes are always greater than those under the no licensing regime. Moreover, the equilibrium aggregate output and consumption under the fixed-fee licensing regime are always greater than those under the royalty licensing regime. Second, with the higher (lower) technology level the patent-holder prefers the fixed-fee (royalty) contract. Third, welfare could be improved through technology transfer, and the level of welfare under the fixed-fee licensing regime is higher than that under the royalty licensing regime.

Suggested Citation

  • Hui-ting Hsieh & Ching-chong Lai, 2013. "A Macroeconomic Model of Imperfect Competition with Patent Licensing," IEAS Working Paper : academic research 13-A007, Institute of Economics, Academia Sinica, Taipei, Taiwan.
    • Handle: RePEc:sin:wpaper:13-a007
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    JEL classification:

    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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