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Licensing with Free Entry

Johannes Muthers (), Toker Doganoglu () and Firat Inceoglu ()
Additional contact information
Toker Doganoglu: University Würzburg,
Firat Inceoglu: University Würzburg,

No 2018-12, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

Abstract: We introduce a fairly general licensing model with an endogenous industry structure – in terms of number of active firms – and general licensing contracts. We show that when the patentee can employ contracts that can condition on market entry or price, it can implement an outcome that yields monopoly profits by awarding the license to a single firm. Furthermore, when the patentee can only use contracts based on the quantities of the licensees, it still captures the entire market via a single licensee, albeit not at the monopoly price. Commonly assumed two-part tariff contracts cannot duplicate this last outcome and yield lower profits. We discuss the welfare implications of various contractual schemes.

Keywords: Patent licensing; free entry; quantity competition. (search for similar items in EconPapers)
JEL-codes: D45 K11 L11 L13 L21 L41 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2018-09
New Economics Papers: this item is included in nep-bec, nep-com, nep-cta, nep-gth, nep-ind and nep-law
Note: English
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Working Paper: Licensing with Free Entry (2013) Downloads
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