A Technology Licensing Model with Endogenous Timing

Hong-Ren Din and Chia-Hung Sun ()
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Hong-Ren Din: Soochow University
Chia-Hung Sun: Soochow University

Review of Industrial Organization, 2023, vol. 63, issue 3, No 5, 407-432

Abstract: Abstract Based on a licensing model where a licensor (an innovator) is itself a producer in the product market, this research investigates the endogenous timing of setting a quantity (price) under unit-royalty licensing, fixed-fee licensing, and two-part tariff licensing contracts. We demonstrate that the results of equilibrium timing depend on the various payment terms of a licensing contract as well as the innovation size. For the fixed-fee licensing contract, both firms play a simultaneous game under Cournot competition and play a sequential game under Bertrand competition. In contrast, both firms play a sequential game under Cournot competition and play a simultaneous game under Bertrand competition when the innovator licenses via a unit-royalty licensing contract and the innovation size is relatively large.

Keywords: Endogenous timing; Technology licensing; Cournot competition; Bertrand competition (search for similar items in EconPapers)
JEL-codes: D21 D43 D45 L13 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11151-023-09917-x

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