Choosing a Licensee from Heterogeneous Rivals

Anthony Creane, Chiu Yu Ko and Hideo Konishi

No 779, Boston College Working Papers in Economics from Boston College Department of Economics

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; production costs; technology transfer; auction games (search for similar items in EconPapers)
JEL-codes: D4 L24 L4 (search for similar items in EconPapers)
Date: 2011-09-30, Revised 2013-04-06
New Economics Papers: this item is included in nep-com, nep-gth, nep-ipr and nep-pr~
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Published, Games and Economic Behavior, 82, 254-268 (2013)

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Journal Article: Choosing a licensee from heterogeneous rivals (2013)
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