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Intra-brand patent licensing with inter-brand competition

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  • Cao, Jiyun
  • Sinha, Uday Bhanu

Abstract

The existing literature has considered licensing of a patented cost-reducing innovation either in a homogeneous good industry or in a differentiated goods industry. We consider a new model of patent licensing between producers of a homogeneous good when there is competition from producers of another brand in the market. We find that for drastic innovation, the optimal intra-brand patent licensing involves only fixed fee when the degree of inter-brand differentiation is low and a two-part tariff otherwise. For non-drastic innovation, the optimal intra-brand patent licensing involves only royalty when the degree of inter-brand differentiation is high, a two-part tariff when it is intermediate, and finally a fixed fee alone when it is low. We also establish that the innovator has more incentive for innovation as an insider than an outsider of this market.

Suggested Citation

  • Cao, Jiyun & Sinha, Uday Bhanu, 2020. "Intra-brand patent licensing with inter-brand competition," Mathematical Social Sciences, Elsevier, vol. 104(C), pages 71-77.
    • Handle: RePEc:eee:matsoc:v:104:y:2020:i:c:p:71-77
    DOI: 10.1016/j.mathsocsci.2020.01.001
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    References listed on IDEAS

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    1. Vishwasrao, Sharmila, 2007. "Royalties vs. fees: How do firms pay for foreign technology?," International Journal of Industrial Organization, Elsevier, vol. 25(4), pages 741-759, August.
    2. Jiyun Cao & Arijit Mukherjee, 2017. "Market Power of the Input Supplier, Technology Transfer and Consumer Welfare," Manchester School, University of Manchester, vol. 85(4), pages 430-449, July.
    3. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    4. Henry Wang, X., 2002. "Fee versus royalty licensing in a differentiated Cournot duopoly," Journal of Economics and Business, Elsevier, vol. 54(2), pages 253-266.
    5. Bagchi, Aniruddha & Mukherjee, Arijit, 2014. "Technology licensing in a differentiated oligopoly," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 455-465.
    6. Bousquet, Alain & Cremer, Helmuth & Ivaldi, Marc & Wolkowicz, Michel, 1998. "Risk sharing in licensing," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 535-554, September.
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    Cited by:

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