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Optimal Licensing of Technology in the Face of (Asymmetric) Competition

Cuihong Fan (), Byoung Heon Jun () and Elmar Wolfstetter
Additional contact information
Cuihong Fan: Shanghai University of Finance and Economics
Byoung Heon Jun: Department of Economics, Korea University, Seoul, Republic of Korea

No 1705, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: We reconsider the optimal licensing of technology by an incumbent firm in the presence of multiple potential licensees. In a first step we show that competition among potential licensees has a drastic effect on optimal two-part tariff contracts. We then introduce more general mechanisms and design a dynamic mechanism that extracts the maximum industry profit while reducing the potential licensees' payoff to the minimum level that they can assure themselves. That mechanism can be viewed as a generalized "chutzpah" mechanism, generalized because it employs royalties to maximize the industry profit. It awards licenses to all firms and prescribes maximum permitted royalty rates plus positive fixed fees.

Keywords: Patent licensing; innovation; optimal contracts; dynamic mechanisms. (search for similar items in EconPapers)
JEL-codes: D21 D43 D44 D45 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta, nep-des and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Optimal licensing of technology in the face of (asymmetric) competition (2018) Downloads
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