IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/116631.html
   My bibliography  Save this paper

Licensing a product innovation in a Cournot industry

Author

Listed:
  • Antelo, Manel
  • Bru, Lluís

Abstract

We study how a firm licenses a product improvement innovation to its rival in the final market. Contrary to what happens with fixed-fee licensing or per-unit royalty licensing, pure ad-valorem royalty licensing is optimal but is welfare reducing. On welfare grounds, fixed-fee licensing dominates per-unit royalty agreements, but has the disadvantage that firms sometimes fail to reach an agreement if licensing deals are restricted to feature fixed fees. A simple rule for a second-best optimal policy on technology licensing is proposed.

Suggested Citation

  • Antelo, Manel & Bru, Lluís, 2023. "Licensing a product innovation in a Cournot industry," MPRA Paper 116631, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:116631
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/116631/1/MPRA_paper_116631.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nalin Kulatilaka & Lihui Lin, 2006. "Impact of Licensing on Investment and Financing of Technology Development," Management Science, INFORMS, vol. 52(12), pages 1824-1837, December.
    2. Iordanis Petsas & Christos Giannikos, 2005. "Process versus Product Innovation in Multiproduct Firms," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 4(3), pages 231-248, December.
    3. Shuai Niu, 2017. "Profit-sharing licensing," Journal of Economics, Springer, vol. 121(3), pages 267-278, July.
    4. Stamatopoulos, Giorgos & Tauman, Yair, 2008. "Licensing of a quality-improving innovation," Mathematical Social Sciences, Elsevier, vol. 56(3), pages 410-438, November.
    5. Nahum D. Melumad & Amir Ziv, 2004. "Reduced Quality and an Unlevel Playing Field Could Make Consumers Happier," Management Science, INFORMS, vol. 50(12), pages 1646-1659, December.
    6. Avagyan, Vardan & Esteban-Bravo, Mercedes & Vidal-Sanz, Jose M., 2014. "Licensing radical product innovations to speed up the diffusion," European Journal of Operational Research, Elsevier, vol. 239(2), pages 542-555.
    7. Zou, Yuxiang & Chen, Tai-Liang, 2020. "Quality differentiation and product innovation licensing," Economic Modelling, Elsevier, vol. 87(C), pages 372-382.
    8. Li, Changying & Song, Juan, 2009. "Technology licensing in a vertically differentiated duopoly," Japan and the World Economy, Elsevier, vol. 21(2), pages 183-190, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Antelo, Manel & Bru, Lluís, 2022. "Product licensing in a Stackelberg industry," MPRA Paper 113985, University Library of Munich, Germany.
    2. Antelo, Manel & Bru, Lluís, 2023. "Why some product innovations are licensed and others are not?," Research in Economics, Elsevier, vol. 77(1), pages 152-158.
    3. Zhao, Dan, 2017. "Choices and impacts of cross-licensing contracts," International Review of Economics & Finance, Elsevier, vol. 48(C), pages 389-405.
    4. Hong, Xianpei & Zhou, Menghuan & Gong, Yeming, 2021. "Dilemma of quality information disclosure in technology licensing," European Journal of Operational Research, Elsevier, vol. 294(2), pages 543-557.
    5. Changying Li & Junmei Wang, 2010. "Licensing a Vertical Product Innovation," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 517-527, December.
    6. Marie-Laure Cabon-Dhersin & Rim Lahmandi-Ayed, 2011. "R&D Organization: Cooperation or Cross-Licensing?," Recherches économiques de Louvain, De Boeck Université, vol. 77(1), pages 31-52.
    7. Neelanjan Sen & Saumya Kaul & Rajit Biswas, 2021. "Technology licensing under product differentiation," Journal of Economics, Springer, vol. 134(3), pages 219-260, December.
    8. Huaige Zhang & Xuejun Wang & Xianpei Hong & Qiang (Steven) Lu, 2018. "Technology Licensing in a Network Product Market: Fixed†Fee versus Royalty Licensing," The Economic Record, The Economic Society of Australia, vol. 94(305), pages 168-185, June.
    9. Zou, Yuxiang & Chen, Tai-Liang, 2020. "Quality differentiation and product innovation licensing," Economic Modelling, Elsevier, vol. 87(C), pages 372-382.
    10. Cho, Sumi & Kim, Doori & Lee, Sang-Ho, 2022. "Free licensing strategy and ex-post privatization policy with passive ownership," Economic Modelling, Elsevier, vol. 106(C).
    11. Wu, Cheng-Han & Kao, Yi-Jhe, 2018. "Cooperation regarding technology development in a closed-loop supply chain," European Journal of Operational Research, Elsevier, vol. 267(2), pages 523-539.
    12. Zhao, Dan & Chen, Hongmin & Hong, Xianpei & Liu, Jingfang, 2014. "Technology licensing contracts with network effects," International Journal of Production Economics, Elsevier, vol. 158(C), pages 136-144.
    13. Ding, Rong & Ko, Chiu Yu, 2021. "Does licensing improve welfare with rent dissipation?," Economic Modelling, Elsevier, vol. 105(C).
    14. Yang, Le & Huang, Zining, 2023. "Quality-improving licensing of an outside innovator in a mixed Cournot duopoly," Economic Modelling, Elsevier, vol. 126(C).
    15. Antelo, Manel & Bru, Lluís, 2023. "Licensing a product innovation from an external innovator to a Stackelberg duopoly," MPRA Paper 117542, University Library of Munich, Germany.
    16. Leonard F. S. Wang & Arijit Mukherjee & Chenhang Zeng, 2020. "Does technology licensing matter for privatization?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(5), pages 1462-1480, September.
    17. 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.
    18. Tieng Kimseng & Amna Javed & Chawalit Jeenanunta & Youji Kohda, 2020. "Sustaining Innovation through Joining Global Supply Chain Networks: The Case of Manufacturing Firms in Thailand," Sustainability, MDPI, vol. 12(13), pages 1-17, June.
    19. Hanna Hottenrott & Bronwyn H. Hall & Dirk Czarnitzki, 2016. "Patents as quality signals? The implications for financing constraints on R&D," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(3), pages 197-217, April.
    20. Tarun Kabiraj & Rittwik Chatterjee & Srobonti Chattopadhyay, 2024. "Free Licensing in a Differentiated Duopoly," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 22(3), pages 589-613, September.

    More about this item

    Keywords

    Product innovation; licensing; Cournot competition; welfare;
    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:116631. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.