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Technology Licensing under Successive Monopoly

Author

Listed:
  • Pei-Cyuan Shih

    (Ming Chuan University)

  • Tsung-Han Chou

    (National Dong Hwa University)

  • Hong Hwang

    (National Taiwan University and RCHSS, Academia Sinica)

  • Yan-Shu Lin

    (National Dong Hwa University)

Abstract

Assume that there is an outside innovator who owns a cost-reducing innovation and the market structure of the industry in question is that of successive monopoly. It is found that, an innovation that is aimed at an upstream firm will tend to be accompanied by a fixed fee license, while an innovation that is aimed at a downstream firm will tend to be accompanied by a per-unit royalty license. But the former is reversed if the market structure of the final goods becomes duopolistic: The optimal licensing contract could never be that of fixed fee when licensing occurs at the upmost production stage. Moreover, the industry profit, consumer surplus and social welfare are all maximized when the licensing occurs at the upmost production stage.

Suggested Citation

  • Pei-Cyuan Shih & Tsung-Han Chou & Hong Hwang & Yan-Shu Lin, 2024. "Technology Licensing under Successive Monopoly," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(3), pages 327-340, May.
    • Handle: RePEc:kap:revind:v:64:y:2024:i:3:d:10.1007_s11151-024-09951-3
    DOI: 10.1007/s11151-024-09951-3
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    More about this item

    Keywords

    Technology licensing; Optimal licensing contract; Successive monopoly; Social welfare;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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