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Privatization and Licensing Under Public Budget Constraint

Author

Listed:
  • Madhuri H. Shastry

    (University of Delhi)

  • Uday Bhanu Sinha

    (University of Delhi)

Abstract

We analyze the interplay of privatization and technology licensing under a public budget constraint, where a cost-disadvantaged public firm has to generate profits to pay for the license. In a mixed duopoly, we consider the licensing of a cost-reducing technology by an outsider innovator. The innovator chooses to license smaller sizes of innovation to both firms, whereas larger innovation is licensed exclusively to the private firm. The public firm alone never gets the license. Thus, the public firm can never “catch up” with its more efficient private rival. We find the possibility of both partial and full privatization in our model. Additionally, from a social planner’s perspective, licensing to both firms is always preferred.

Suggested Citation

  • Madhuri H. Shastry & Uday Bhanu Sinha, 2024. "Privatization and Licensing Under Public Budget Constraint," Journal of Industry, Competition and Trade, Springer, vol. 24(1), pages 1-22, December.
    • Handle: RePEc:kap:jincot:v:24:y:2024:i:1:d:10.1007_s10842-024-00411-y
    DOI: 10.1007/s10842-024-00411-y
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    References listed on IDEAS

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    More about this item

    Keywords

    Mixed duopoly; Technology licensing; Privatization; Public budget; Welfare;
    All these keywords.

    JEL classification:

    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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