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The dominance of fee licensing contracts under asymmetric information signaling

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Abstract

This paper compares different licensing contracts defined by the type of payment (fees or royalties) and contract duration (short- or long-term) in a setting in which an outside patent holder that owns a patented innovation lasting for two periods licenses it to downstream Cournot firms; further, there is asymmetric information about firms' costs emerged from the use of innovation, but they are signaled through the output produced in period 1. In this context, if we concentrate on fee contracts, the patent holder prefers short-term (revealing) contracts rather than long-term contracts.

Suggested Citation

  • Manel Antelo, 2009. "The dominance of fee licensing contracts under asymmetric information signaling," Economic Working Papers at Centro de Estudios Andaluces E2009/08, Centro de Estudios Andaluces.
    • Handle: RePEc:cea:doctra:e2009_08
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    References listed on IDEAS

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    1. Arora, Ashish & Fosfuri, Andrea, 2003. "Licensing the market for technology," Journal of Economic Behavior & Organization, Elsevier, vol. 52(2), pages 277-295, October.
    2. Morton I. Kamien & Yair Tauman, 1986. "Fees Versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(3), pages 471-491.
    3. Brousseau,Eric & Glachant,Jean-Michel (ed.), 2002. "The Economics of Contracts," Cambridge Books, Cambridge University Press, number 9780521814904, September.
    4. Manel Antelo, 2009. "On contract duration of royalty licensing contracts," Spanish Economic Review, Springer;Spanish Economic Association, vol. 11(4), pages 301-301, December.
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    6. Michael L. Katz & Carl Shapiro, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(3), pages 567-589.
    7. Bharat N. Anand & Tarun Khanna, 2000. "The Structure of Licensing Contracts," Journal of Industrial Economics, Wiley Blackwell, vol. 48(1), pages 103-135, March.
    8. repec:bla:jindec:v:48:y:2000:i:1:p:103-35 is not listed on IDEAS
    9. Burguet, Roberto, 1996. "Optimal Repeated Purchases When Sellers Are Learning about Costs," Journal of Economic Theory, Elsevier, vol. 68(2), pages 440-455, February.
    10. Nancy T. Gallini & Brian D. Wright, 1990. "Technology Transfer under Asymmetric Information," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 147-160, Spring.
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    Cited by:

    1. Manel Antelo, 2010. "Screening vs. signaling in technology licensing," Economic Working Papers at Centro de Estudios Andaluces E2010/05, Centro de Estudios Andaluces.

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    More about this item

    Keywords

    Licensing; signaling; fees; royalties; short- and long-term contracts; welfare;
    All these keywords.

    JEL classification:

    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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