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A Technology Licensing Model with Endogenous Timing

Author

Listed:
  • Hong-Ren Din

    (Soochow University)

  • Chia-Hung Sun

    (Soochow University)

Abstract

Based on a licensing model where a licensor (an innovator) is itself a producer in the product market, this research investigates the endogenous timing of setting a quantity (price) under unit-royalty licensing, fixed-fee licensing, and two-part tariff licensing contracts. We demonstrate that the results of equilibrium timing depend on the various payment terms of a licensing contract as well as the innovation size. For the fixed-fee licensing contract, both firms play a simultaneous game under Cournot competition and play a sequential game under Bertrand competition. In contrast, both firms play a sequential game under Cournot competition and play a simultaneous game under Bertrand competition when the innovator licenses via a unit-royalty licensing contract and the innovation size is relatively large.

Suggested Citation

  • Hong-Ren Din & Chia-Hung Sun, 2023. "A Technology Licensing Model with Endogenous Timing," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 63(3), pages 407-432, November.
    • Handle: RePEc:kap:revind:v:63:y:2023:i:3:d:10.1007_s11151-023-09917-x
    DOI: 10.1007/s11151-023-09917-x
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    References listed on IDEAS

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    More about this item

    Keywords

    Endogenous timing; Technology licensing; Cournot competition; Bertrand competition;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory

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