On the superiority of fixed fee over auction in asymmetric markets

Stamatopoulos, Giorgos; Tauman, Tami

doi:10.1016/j.geb.2008.11.008

Cited by 21 publications

(25 citation statements)

References 5 publications

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“…In a general competitive environment under complete information, if the patentee is an outside innovator, it has been generally shown that fixed fee licensing is optimal (see Katz and Shapiro (1986), Kamien and Tauman (1986), Kamien et al, (1992), Stamatopolous and Tauman (2009)) whereas per-unit royalty contract is optimal when the patentee is an insider (Wang (1998), (2002), Wang and Yang (2004), Kamien and Tauman (2002)) 4 . In this paper of outside innovator, we get a differentand new set of results on optimal licensing contracts which depend on the cost asymmetries of the licensees.…”

Section: Literature Reviewmentioning

confidence: 99%

‘To sell or not to sell’: Licensing versus selling by an outside innovator

Banerjee

Poddar

2019

Economic Modelling

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Study of patent licensing in spatial competition is relatively sparse. We study optimal licensing policies of an outside innovator in spatial framework when the potential licensees are asymmetric. We also introduce the notion of selling the property rights of innovation. We then examine the incentive of the innovator who sell the rights and compare that with conventional licensing contracts. We address this problem in linear city with two competing asymmetric firms (potential licensees). We show the optimal licensing policy is pure royalty to both firms when cost differentials between the firms are relatively small, otherwise it is fixed fee licensing to the efficient firm only. Interestingly, we show the innovator is always better-off selling innovation to one of the firms. This holds irrespective of the size of the innovation (drastic or non-drastic) and the degree of pre-innovation cost asymmetry between the firms. Social welfare is greater under selling than licensing.

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Section: Literature Reviewmentioning

confidence: 99%

‘To sell or not to sell’: Licensing versus selling by an outside innovator

Banerjee

Poddar

2019

Economic Modelling

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“…For example: technology shares, auctions, bargaining, cross-licensing, ad valorem royalties and up-front payment, etc. Related discussion can refer to Katz and Shapiro [6], Stamatopoulos and Tauman [21], Kishimoto et al [22], Miao [23], Heywood et al [24], Jeon and Lefouili [25], and Lee et al [26]. However, unit royalty and fixed-fee licensing remain the most important licensing tools in the theory and practice.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Equations (21) and (22) represent that when the h type firm chooses the contract for the type, h will always be worth more than choosing the contract for the l type and vice versa. In other words, if these two mixed licensing choice combinations, r * l , F * l and r * h , F * h , meet the incentive compatibility constraints of Equations (21) and (22), domestic firms will surely choose the licensing choice, which is consistent with what is observed in the actual market. This is known as the sorting (or Spence-Mirrless) condition.…”

Section: The Model With Asymmetric Informationmentioning

confidence: 99%

On the Sustainability of Technology Licensing Under Asymmetric Information Game

Tsai

et al. 2019

Sustainability

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Past research indicates that a licensor tends to adopt the fixed fee, in order to obtain higher profit rather than secure royalty when he participates in zero production in the market. This study instead finds that the patentee’s optimum strategy may vary. In addition to the fixed-fee strategy, royalty or mixed licensing, or fixed fee plus royalty may be potential choices for the patentee as well which is depend on the market scale, incidence of market scale, and magnitude of cost-saving. The patentee may choose to only authorize a type of high market size based on self-interested motives. The technology licensing market is not sustainable.

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“…In fact, since contracts based on a …xed fee are dominated by contracts based on an auction when buyers are symmetric (Kamien and Tauman 1986, Katz and Shapiro 1986, it su¢ ces for us to consider only the latter type of contracts and this is the approach that we have taken, except where noted, in this paper. When buyers are asymmetric, a …xed-fee policy can be more pro…table than an auction policy (Stamatopoulos andTauman 2009, Miao 2009). …”

Section: The Modelmentioning

confidence: 99%