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Optimal licensing in a spatial model

Author

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  • CABALLERO-SANZ, Francisco
  • MONER-COLONQUES, Rafael
  • SEMPERE-MONERRIS, José J.

Abstract

We analyze a multi-stage non-cooperative game involving an outside patent-holder, who seeks to licence a process innovation, and two price-setting firms located on a circumference. Three licensing policies are studied: the auction, the fixed fee and the per unit output royalty. The main finding is that, contrary to standard results, royalties yield higher payoffs to the patent-holder than do an auction policy or a fixed fee policy regardless of the size of the innovation. Besides, a conflict between private and social interests arises since consumers are better off when the technology is licensed via fees.
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Suggested Citation

  • CABALLERO-SANZ, Francisco & MONER-COLONQUES, Rafael & SEMPERE-MONERRIS, José J., 2002. "Optimal licensing in a spatial model," LIDAM Reprints CORE 1588, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:1588
    Note: In : Annales d'Economie et de Statistique, 66, 257-279, 2002
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    Cited by:

    1. Bouguezzi, Fehmi & EL ELJ, Moez, 2009. "Vertical Integration and Patent Licensing in Upstream and Downstream Markets," MPRA Paper 22212, University Library of Munich, Germany.
    2. Sánchez, M. & Nerja, A., 2024. "The role of asymmetric innovation’s sizes in technology licensing under partial vertical integration," Research in Economics, Elsevier, vol. 78(2).
    3. Stefano Colombo, 2014. "Fee versus royalty licensing in spatial Cournot competition," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(3), pages 859-879, May.
    4. Lu, Yuanzhu & Poddar, Sougata, 2014. "Patent licensing in spatial models," Economic Modelling, Elsevier, vol. 42(C), pages 250-256.
    5. Meniere, Yann & Parlane, Sarah, 2010. "Decentralized licensing of complementary patents: Comparing the royalty, fixed-fee and two-part tariff regimes," Information Economics and Policy, Elsevier, vol. 22(2), pages 178-191, May.
    6. Amir, Rabah & Encaoua, David & Lefouili, Yassine, 2014. "Optimal licensing of uncertain patents in the shadow of litigation," Games and Economic Behavior, Elsevier, vol. 88(C), pages 320-338.
    7. John Heywood & Zheng Wang, 2015. "How to license a transport innovation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(2), pages 485-500, December.
    8. Poddar, Sougata & Bouguezzi, Fehmi, 2011. "Patent licensing in spatial competition: Does pre-innovation cost asymmetry matter?," MPRA Paper 32764, University Library of Munich, Germany.
    9. Ana Mauleon & Vincent Vannetelbosch & Cecilia Vergari, 2013. "Bargaining and delay in patent licensing," International Journal of Economic Theory, The International Society for Economic Theory, vol. 9(4), pages 279-302, December.
    10. PARLANE, Sarah & MENIERE, Yann, 2006. "Licensing a standard: fixed fee versus royalty," LIDAM Discussion Papers CORE 2006116, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    11. Arijit Mukherjee & Yingyi Tsai, 2013. "Technology licensing under optimal tax policy," Journal of Economics, Springer, vol. 108(3), pages 231-247, April.
    12. Lemarié, S., 2005. "Vertical integration and the licensing of innovation with a fixed fee or a royalty," Working Papers 200517, Grenoble Applied Economics Laboratory (GAEL).
    13. Sen, Debapriya & Tauman, Yair, 2007. "General licensing schemes for a cost-reducing innovation," Games and Economic Behavior, Elsevier, vol. 59(1), pages 163-186, April.
    14. Neelanjan Sen, 2015. "Technology Transfer in Oligopoly in Presence of Fixed-Cost in Production," Journal of Industry, Competition and Trade, Springer, vol. 15(4), pages 383-409, December.
    15. Matthew D. Henry & John L. Turner, 2010. "Patent Damages And Spatial Competition," Journal of Industrial Economics, Wiley Blackwell, vol. 58(2), pages 279-305, June.
    16. M?ni?re, Yann & Parlane, Sarah, 2008. "Decentralized of licensing of complementary patents: comparing royalty, fixed fee and two part tariff," PIE/CIS Discussion Paper 383, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    17. Chen, Jingxian & Liang, Liang & Yao, Dong-qing, 2017. "An analysis of intellectual property licensing strategy under duopoly competition: Component or product-based?," International Journal of Production Economics, Elsevier, vol. 193(C), pages 502-513.
    18. Toshihiro Matsumura & Noriaki Matsushima, 2007. "On patent licensing in spatial competition with endogenous location choice," Discussion Papers 2007-35, Kobe University, Graduate School of Business Administration.

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