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Partial acquisition and patent licensing in an asymmetric duopoly

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  • Shuai Niu
  • Meiling Wang

Abstract

This paper analyzes partial ownership arrangements in a heterogenous‐goods duopoly market with subsequent two‐part tariff licensing. The equilibrium under patent licensing is inefficient in the sense that there is an excessive concentration of production in the licensor. A partial ownership arrangement, under which the low‐cost firm holds a partial interest in the high‐cost firm, decreases the competitive incentives of the low‐cost firm. In addition, it decreases the equilibrium royalty rate under patent licensing. Both effects contribute to the improvement of the production distribution in the duopoly market. Consequently, a partial acquisition occurring before patent licensing may be both profitable and welfare‐improving.

Suggested Citation

  • Shuai Niu & Meiling Wang, 2022. "Partial acquisition and patent licensing in an asymmetric duopoly," Manchester School, University of Manchester, vol. 90(1), pages 92-105, January.
    • Handle: RePEc:bla:manchs:v:90:y:2022:i:1:p:92-105
    DOI: 10.1111/manc.12386
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    References listed on IDEAS

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