LICENSING BY OUTSIDE INNOVATOR IN HOTELLING MODEL REVISITED

Yuanzhu Lu () and Fulan Wu
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Yuanzhu Lu: International School of Business and Finance, Sun Yat-Sen University, Guangzhou, Guangdong, P. R. China
Fulan Wu: School of Economics, Zhejiang University Hangzhou, Zhejiang, P. R. China

The Singapore Economic Review (SER), 2024, vol. 69, issue 03, 1001-1021

Abstract: This paper extends Banerjee and Poddar [Banerjee, S and S Poddar (2019). ‘To sell or not to sell’: Licensing versus selling by an outside innovator. Economic Modelling, 76, 293–304] by lifting the cap on per unit royalty rates in the cases of royalty licensing and two-part tariff licensing. We reconsider the optimal technology licensing contract by an outside innovator facing two heterogeneous licensees in a standard Hotelling framework. Our findings show that the optimal licensing policy could be fixed fee to the efficient firm, or two-part tariff to both firms (pure royalty to both firms), or two-part tariff to the efficient firm, depending upon the cost differentials between the firms and the size of innovation.

Keywords: Patent licensing; Hotelling model; Asymmetric licensees; Welfare analysis (search for similar items in EconPapers)
JEL-codes: D43 D45 L13 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1142/S0217590821500417

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