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Patent Licensing in the Presence of Trade Barriers

Author

Listed:
  • Kuang-Cheng Andy Wang

    (Chang Gung University)

  • Ching-Chih Tseng

    (National Dong Hwa University)

  • Wen-Jung Liang

    (National Dong Hwa University)

Abstract

We develop a two-country duopoly model to explore the optimal licensing contract for an outsider licensor in terms of fixed-fee and royalty licensing by taking into account trade barriers when firms produce a homogeneous product and engage in Bertrand competition in each market. The present paper focuses on the interaction between licensing and trade barriers in two international markets. We show that both royalty and non-exclusive fixed-fee licensing can be optimal. Furthermore, exclusive fixed-fee licensing can be optimal, which is a result that is not discussed in the existing literature.

Suggested Citation

  • Kuang-Cheng Andy Wang & Ching-Chih Tseng & Wen-Jung Liang, 2016. "Patent Licensing in the Presence of Trade Barriers," The Japanese Economic Review, Springer, vol. 67(3), pages 329-347, September.
    • Handle: RePEc:spr:jecrev:v:67:y:2016:i:3:d:10.1111_jere.12098
    DOI: 10.1111/jere.12098
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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. Uday Bhanu Sinha, 2010. "Strategic licensing, exports, FDI, and host country welfare," Oxford Economic Papers, Oxford University Press, vol. 62(1), pages 114-131, January.
    3. Sougata Poddar & Uday Bhanu Sinha, 2004. "On Patent Licensing in Spatial Competition," The Economic Record, The Economic Society of Australia, vol. 80(249), pages 208-218, June.
    4. Liang, Wen-Jung & Hwang, Hong & Mai, Chao-Cheng, 2006. "Spatial discrimination: Bertrand vs. Cournot with asymmetric demands," Regional Science and Urban Economics, Elsevier, vol. 36(6), pages 790-802, November.
    5. Dimitry Rtischev, 2009. "Licensing of a lower-cost production process to an asymmetric Cournot duopoly," Gakushuin Economic Papers, Gakushuin University, Faculty of Economics, vol. 45(4), pages 325-336.
    6. Nadiri, M.I., 1993. "Innovations and Technological Spillovers," Working Papers 93-31, C.V. Starr Center for Applied Economics, New York University.
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    10. M. Ishaq Nadiri, 1993. "Innovations and Technological Spillovers," NBER Working Papers 4423, National Bureau of Economic Research, Inc.
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    14. repec:ebl:ecbull:v:4:y:2004:i:14:p:1-6 is not listed on IDEAS
    15. Mukherjee, Arijit & Pennings, Enrico, 2006. "Tariffs, licensing and market structure," European Economic Review, Elsevier, vol. 50(7), pages 1699-1707, October.
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Wang, Kuang-Cheng Andy & Wang, Yi-Jie & Liang, Wen-Jung & Tsai, Ming-Che & Mai, Chao-Cheng, 2016. "Patent licensing under financial structure with limited liability," International Review of Economics & Finance, Elsevier, vol. 46(C), pages 121-135.
    2. Kuang-Cheng Andy Wang & Yi-Jie Wang & Wen-Jung Liang, 2021. "Comparing Cournot and Bertrand Equilibria in the Presence of Spatial Barriers and R&D," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 58(3), pages 475-491, May.
    3. Li, Hai & Qing, Qiankai & Wang, Juan & Hong, Xianpei, 2021. "An analysis of technology licensing and parallel importation under different market structures," European Journal of Operational Research, Elsevier, vol. 289(1), pages 132-143.

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    More about this item

    Keywords

    D43; D45; L13;
    All these keywords.

    JEL classification:

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

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