A Macroeconomic Model of Imperfect Competition with Patent Licensing

Hsieh Hui-ting (), Ching-chong Lai and Chen Kuan-jen ()
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Hsieh Hui-ting: Department of Economics, National Chung Cheng University, Minhsiung, Chiayi 621, Taiwan
Chen Kuan-jen: Department of Economics, Fu-Jen Catholic University, New Taipei, Taiwan

The B.E. Journal of Economic Analysis & Policy, 2015, vol. 15, issue 4, 1579-1618

Abstract: This paper sets up an imperfectly competitive macroeconomic model that features the strategic interaction between the patent-holding firm and licensees, and uses it to analyze the relevant macro-variables under various licensing arrangements. Some main findings emerge from the analysis. First, the equilibrium aggregate output and aggregate consumption under fixed-fee and royalty licensing regimes are always greater than those under the no licensing regime. Moreover, the equilibrium aggregate output and consumption under the fixed-fee licensing regime are always greater than those under the royalty licensing regime. Second, with the higher (lower) technology level the patent holder prefers the fixed-fee (royalty) contract. Third, welfare could be improved through technology transfer, and the level of welfare under the fixed-fee licensing regime is higher than that under the royalty licensing regime. Lastly, this paper discusses some extensions of the baseline model.

Keywords: imperfect competition; macroeconomic model; fixed-fee licensing; royalty licensing (search for similar items in EconPapers)
JEL-codes: D45 E10 L16 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1515/bejeap-2013-0144

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