Optimal Licensing Policy in Differentiated Industries

Nisvan Erkal ()

No 894, Department of Economics - Working Papers Series from The University of Melbourne

Abstract: This paper analyses the policy implications of licensing between producers of differentiated goods. We consider and compare two-part tariff, fixed fee, royalty and collusive licensing contracts. Under the optimal licensing policy, there will be no technology transfers if the innovation size is sufficiently small and degree of product differentiation is sufficiently low. On the other hand, licensing deals that involve drastic innovations are always socially desirable. In the limit, as product differentiation converges to zero, it becomes socially desirable to transfer drastic innovations only. The range of innovation sizes that is socially optimal to transfer increases as product differentiation increases.

Keywords: Patent licensing; product differentiation; antitrust policy (search for similar items in EconPapers)
JEL-codes: D4 L41 O38 (search for similar items in EconPapers)
Date: 2004
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Journal Article: Optimal Licensing Policy in Differentiated Industries (2005)
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