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Licensing By Outside Innovator In Hotelling Model Revisited

Author

Listed:
  • YUANZHU LU

    (International School of Business and Finance, Sun Yat-Sen University, Guangzhou, Guangdong, P. R. China)

  • FULAN WU

    (School of Economics, Zhejiang University Hangzhou, Zhejiang, P. R. China)

Abstract

This paper extends Banerjee and Poddar [Banerjee, S and S Poddar (2019). ‘To sell or not to sell’: Licensing versus selling by an outside innovator. Economic Modelling, 76, 293–304] by lifting the cap on per unit royalty rates in the cases of royalty licensing and two-part tariff licensing. We reconsider the optimal technology licensing contract by an outside innovator facing two heterogeneous licensees in a standard Hotelling framework. Our findings show that the optimal licensing policy could be fixed fee to the efficient firm, or two-part tariff to both firms (pure royalty to both firms), or two-part tariff to the efficient firm, depending upon the cost differentials between the firms and the size of innovation.

Suggested Citation

  • Yuanzhu Lu & Fulan Wu, 2024. "Licensing By Outside Innovator In Hotelling Model Revisited," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 69(03), pages 1001-1021, June.
    • Handle: RePEc:wsi:serxxx:v:69:y:2024:i:03:n:s0217590821500417
    DOI: 10.1142/S0217590821500417
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    More about this item

    Keywords

    Patent licensing; Hotelling model; Asymmetric licensees; Welfare analysis;
    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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