Welfare reducing vertical licensing in the presence of complementary inputs

We examine the licensing decision of a non-producer innovator with a new technology that enables the manufacture of a saleable product. The technology is licensed and each user privately knows its innovation-related production cost, whereas the licensor only knows, with a certain probability, that this cost may be low (the user is efficient) or high (the user is inefficient). When a single licence is granted through separating contracts, only the contract intended for the inefficient user involves a per-unit royalty, but when two licences are granted through separating contracts, the contracts intended for the inefficient and efficient users both feature a per-unit royalty. However, screening is less likely as the number of licences increases, to the point that the licensor does not screen users when granting three licences. Additionally, whereas the diffusion of the innovation is socially insufficient under symmetric information, with asymmetric information it may be socially optimal. Finally, when licensing with contracts involving an ad-valorem royalty is also feasible the licensor finds it less attractive than licensing with a per-unit royalty.

show abstract

Technology Licensing under Successive Monopoly

Shih,

Chou,

Hwang

et al. 2024

Rev Ind Organ

View full text Add to dashboard Cite

scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.

Contact Info

customersupport@researchsolutions.com

10624 S. Eastern Ave., Ste. A-614

Henderson, NV 89052, USA

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

Blog Terms and Conditions API Terms Privacy Policy Contact Cookie Preferences Do Not Sell or Share My Personal Information

Made with 💙 for researchers

Part of the Research Solutions Family.

Welfare reducing vertical licensing in the presence of complementary inputs

Cited by 4 publications

References 28 publications

International licensing under an endogenous tariff in vertically-related markets

International licensing under an endogenous tariff in vertically-related markets

Licensing of a new technology by an outside and uninformed licensor

Technology Licensing under Successive Monopoly

Contact Info

Product

Resources

About