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Patent strength and optimal two-part tariff licensing with a potential rival

Author

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  • Kitagawa, Tatsuya
  • Masuda, Yasushi
  • Umezawa, Masashi

Abstract

We investigate a two-part tariff licensing contract that enables an incumbent innovator to license the technology for a new product to a potential rival, who may alternatively develop a compatible technology for an imperfectly substitutable product. We identify the optimal two-part tariff licensing contract based on the development cost incurred by the rival, the market parameter, and the substitution coefficient.

Suggested Citation

  • Kitagawa, Tatsuya & Masuda, Yasushi & Umezawa, Masashi, 2014. "Patent strength and optimal two-part tariff licensing with a potential rival," Economics Letters, Elsevier, vol. 123(2), pages 227-231.
    • Handle: RePEc:eee:ecolet:v:123:y:2014:i:2:p:227-231
    DOI: 10.1016/j.econlet.2014.02.011
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Tatsuya Kitagawa & Yasushi Masuda & Masashi Umezawa, 2020. "Impact of technology development costs on licensing form in a differentiated Cournot duopoly," International Journal of Economic Theory, The International Society for Economic Theory, vol. 16(2), pages 153-166, June.
    2. Qing Zhang & Juan Li & Tiaojun Xiao, 2022. "Contract design for technology sharing between two farmers," Annals of Operations Research, Springer, vol. 314(2), pages 677-707, July.
    3. Aika Monden & Katsuyoshi Takashima & Yusuke Zennyo, 2021. "Revenue‐Sharing Contracts under Demand Uncertainty in Shopping Center," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(2), pages 556-573, June.
    4. Chang Ray-Yun & Hwang Hong & Peng Cheng-Hau, 2017. "Competition, Product Innovation and Licensing," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(1), pages 1-14, February.
    5. Ku-Chu Tsao & Jin-Li Hu & Hong Hwang & Yan-Shu Lin, 2023. "More licensed technologies may make it worse: a welfare analysis of licensing vertically two-tier foreign technologies," Journal of Economics, Springer, vol. 139(1), pages 71-88, June.
    6. Ray-Yun Chang & Yan-Shu Lin & Jin-Li Hu, 2015. "Mixed Competition and Patent Licensing," Australian Economic Papers, Wiley Blackwell, vol. 54(4), pages 229-249, December.
    7. Chen, Xu & Peng, Ying & Wang, Xiaojun & Wang, Pengfei, 2024. "Capacity sharing between competing manufacturers: A collective good or a detrimental effect?," International Journal of Production Economics, Elsevier, vol. 268(C).
    8. 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.
    9. Poyago-Theotoky, Joanna & Tsai, Yingyi, 2023. "Universally strong IPR protection and global welfare: A market-penetration perspective," Economic Modelling, Elsevier, vol. 124(C).
    10. Neelanjan Sen & Saumya Kaul & Rajit Biswas, 2021. "Technology licensing under product differentiation," Journal of Economics, Springer, vol. 134(3), pages 219-260, December.
    11. Wang Jing & Yang Fangbai, 2017. "Optimal Two-Part Tariff Licensing in a Differentiated Mixed Duopoly," Journal of Systems Science and Information, De Gruyter, vol. 5(3), pages 279-288, June.

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    More about this item

    Keywords

    Licensing; Two-part tariff; Incumbent innovator; Differentiated Cournot duopoly; Patent strength;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other

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