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A Macroeconomic Model of Imperfect Competition with Patent Licensing

Author

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  • 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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    References listed on IDEAS

    as
    1. Roberto Censolo & Caterina Colombo, 2008. "Mixed Industrial Structure And Short-Run Fiscal Multiplier," Australian Economic Papers, Wiley Blackwell, vol. 47(2), pages 156-165, June.
    2. Costa, Luís F. & Dixon, Huw David, 2011. "Fiscal policy under imperfect competition with flexible prices: An overview and survey," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 5, pages 1-57.
    3. Juin-jen Chang & Hsiao-wen Hung & Jhy-yuan Shieh & Ching-chong Lai, 2007. "Optimal Fiscal Policies, Congestion and Over-entry," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(1), pages 137-151, March.
    4. Jaimovich, Nir, 2007. "Firm dynamics and markup variations: Implications for sunspot equilibria and endogenous economic fluctuations," Journal of Economic Theory, Elsevier, vol. 137(1), pages 300-325, November.
    5. Jhy-hwa Chen & Jhy-yuan Shieh & Ching-chong Lai & Juin-jen Chang, 2005. "Productive public expenditure and imperfect competition with endogenous price markup," Oxford Economic Papers, Oxford University Press, vol. 57(3), pages 522-544, July.
    6. Heijdra, Ben J., 2017. "Foundations of Modern Macroeconomics," OUP Catalogue, Oxford University Press, edition 3, number 9780198784135.
    7. Torregrosa, Ramon J., 1998. "On the monotonicity of balanced budget multiplier under imperfect competition," Economics Letters, Elsevier, vol. 59(3), pages 331-335, June.
    8. Devereux, Michael B & Head, Allen C & Lapham, Beverly J, 2000. " Government Spending and Welfare with Returns to Specialization," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(4), pages 547-561, December.
    9. Saracho de la Torre, Ana Isabel & San Martín Lizarralde, Marta, 2009. "Royalty Licensing," IKERLANAK 2009-40, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
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    More about this item

    Keywords

    Imperfect competition; Macroeconomic model; Fixed-fee licensing; Royalty licensing;

    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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