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Patent Licensing By A Standard Auction In The Presence Of Network Externality

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  • SUMIT SARKAR

Abstract

In this paper we develop a model of licensing a new product technology of a network good. The new technology improves the quality of the network good and is protected by a patent. In such a context we find that a standard auction mechanism can efficiently allot the new technology under both complete and incomplete information. We consider two possible downstream market structures—one where the firms simultaneously choose prices and the other where they sequentially choose prices. We find that the equilibrium bids and expected auction revenue are more when the firms move simultaneously in the posterior price game. We also find that the equilibrium bids and expected auction revenue decrease as the network effect becomes stronger.

Suggested Citation

  • Sumit Sarkar, 2005. "Patent Licensing By A Standard Auction In The Presence Of Network Externality," Manchester School, University of Manchester, vol. 73(2), pages 228-245, March.
    • Handle: RePEc:bla:manchs:v:73:y:2005:i:2:p:228-245
    DOI: 10.1111/j.1467-9957.2005.00443.x
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    References listed on IDEAS

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    Cited by:

    1. Li, Changying & Geng, Xiaoyan, 2008. "Licensing to a durable-good monopoly," Economic Modelling, Elsevier, vol. 25(5), pages 876-884, September.

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