Choosing a licensee from heterogeneous rivals

Anthony Creane, Chiu Yu Ko and Hideo Konishi

Games and Economic Behavior, 2013, vol. 82, issue C, 254-268

Abstract: We examine a firm that can license its production technology to a rival when firms are heterogeneous in production costs. We show that a complete technology transfer from one firm to another always increases joint profit under weakly concave demand when at least three firms remain in the industry. A jointly profitable transfer may reduce social welfare, although a jointly profitable transfer from the most efficient firm always increases welfare. We also consider two auction games under complete information: a standard first-price auction and a menu auction by Bernheim and Whinston (1986). With natural refinement of equilibria, we show that the resulting licensees are ordered by degree of efficiency: menu auction, simple auction, and joint-profit-maximizing licensees, in (weakly) descending order.

Keywords: Licensing; Technology transfer (search for similar items in EconPapers)
JEL-codes: D4 L24 L4 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Choosing a Licensee from Heterogeneous Rivals (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:82:y:2013:i:c:p:254-268

DOI: 10.1016/j.geb.2013.07.013

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