WELFARE REDUCING LICENSING

Ramón Faulí-Oller () and Joel Sandonis
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Ramón Faulí-Oller: Universidad de Alicante

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: In this paper, we characterize situations where licensing an innovation to a rival firm using two-part tariff contracts (a fixed fee plus a linear per unit of output royalty) reduces social welfare. We show that it occurs if and only if i) the goods are close enough substitutes, ii) the innovation is large enough but not drastic and iii) the firms compete in prices. Moreover, we show that, regardless of the type of competition, first, the optimal contract always includes a positive royalty and, second, even drastic innovations are licensed whenever the goods are not homogeneous.

Keywords: Two-part tariff contracts; licensing (search for similar items in EconPapers)
JEL-codes: D45 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2000-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published by Ivie

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http://www.ivie.es/downloads/docs/wpasad/wpasad-2000-12.pdf Fisrt version / Primera version, 2000 (application/pdf)

Related works:
Journal Article: Welfare reducing licensing (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2000-12

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