Technology Licensing between Rival Firms in Presence of Asymmetric Information

Neelanjan Sen and Bhattacharya Sukanta ()
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Bhattacharya Sukanta: Department of Economics, University of Calcutta, 56A, B.T. Road, Kolkata-700050, India

The B.E. Journal of Theoretical Economics, 2017, vol. 17, issue 1, 35

Abstract: This paper investigates the possibility of licensing between rival firms in a Cournot duopoly market. Unlike Heywood, Li, and Ye (2014. “Per Unit vs. Ad Valorem Royalties under Asymmetric Information.” International Journal of Industrial Organization 37:38–46), the cost information of the licensee is private in the pre-licensing stage. If inspection of the licensee’s technology is not possible by the licensor i) technology is never transferred from the low-cost firm (licensor) to the high-cost firm (licensee) via fixed-fee and ii) in the case of royalty licensing technology will be transferred only if the cost difference between the firms is sufficiently high. Moreover, under fixed-fee and royalty licensing, the licensee will always allow the licensor to inspect its technology, if inspection is possible. If inspection is undertaken by the licensor, technology will be transferred i) if the cost difference is low via fixed fee and ii) always via royalty.

Keywords: technology licensing; cournot competition; asymmetry information (search for similar items in EconPapers)
JEL-codes: D82 L13 L24 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (6)

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DOI: 10.1515/bejte-2015-0097

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