Choosing a Production Joint Venture Partner

Rong Ding, Chiu Yu Ko and Bo Shen

Journal of Institutional and Theoretical Economics (JITE), 2020, vol. 176, issue 4, 665-685

Abstract: We study how a firm inside or outside an industry selects a partner among asymmetric firms to form a production joint venture (PJV), in which technology transfer takes place. We show that the partner selected under a two-part tariff contractis always (weakly) more efficient than the one selected under a first-price auction. Comparing these two schemes, we find that a two-part tariff contract can be superior for the most efficient incumbent firm or for an outside innovator, while a first-price auction is always superior for the least efficient incumbent firm. Moreover, in terms of consumer surplus and welfare, two-part tariff contract is always (weakly) superior.

Keywords: joint venture; asymmetric firms; two-part tariff; first-price auction (search for similar items in EconPapers)
JEL-codes: D4 D43 L1 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1628/jite-2020-0039

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