Technology Licensing under Successive Monopoly

Pei-Cyuan Shih (), Tsung-Han Chou (), Hong Hwang () and Yan-Shu Lin ()
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Pei-Cyuan Shih: Ming Chuan University
Tsung-Han Chou: National Dong Hwa University
Hong Hwang: National Taiwan University and RCHSS, Academia Sinica
Yan-Shu Lin: National Dong Hwa University

Review of Industrial Organization, 2024, vol. 64, issue 3, No 1, 327-340

Abstract: Abstract Assume that there is an outside innovator who owns a cost-reducing innovation and the market structure of the industry in question is that of successive monopoly. It is found that, an innovation that is aimed at an upstream firm will tend to be accompanied by a fixed fee license, while an innovation that is aimed at a downstream firm will tend to be accompanied by a per-unit royalty license. But the former is reversed if the market structure of the final goods becomes duopolistic: The optimal licensing contract could never be that of fixed fee when licensing occurs at the upmost production stage. Moreover, the industry profit, consumer surplus and social welfare are all maximized when the licensing occurs at the upmost production stage.

Keywords: Technology licensing; Optimal licensing contract; Successive monopoly; Social welfare (search for similar items in EconPapers)
JEL-codes: D42 D45 L12 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s11151-024-09951-3

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