Research ArticleOpen AccessGoogle Scholar indexed
Licensing Contracts in Hotelling Structure
- 1
- 2
Theoretical Economics Letters·Volume 01 (2011)·Pages 57–62·Published 3 November 2011·DOI10.4236/tel.2011.13013
Copy link · social · email
Abstract
This paper discusses the question of optimal licensing contracts in Hotelling structure and focuses on the unique features of this structure in this context. We show that a royalty equilibrium exists if and only if transport cost lies in a specified interval, but the royalty rate can be higher than the amount of cost saving. While fee licensing only is never profitable, the optimal licensing contract consists of both fee and royalty. In equilibrium the market is fully covered with monopolistic goods.
KeywordsTechnology TransferRoyalty LicensingFee LicensingHotelling Structure
- T. Kabiraj, “Technology Transfer in a Stackelberg Structure: Licensing Contracts and Welfare,” The Manchester School, Vol. 73, No. 1, 2005, pp. 1-28. doi:10.1111/j.1467-9957.2005.00421.x
- D. Sen and Y. Tauman, “General Licensing Schemes for a Cost-reducing Innovation,” Games and Economic Behavior, Vol. 59, No. 1, 2007, pp. 163-186. doi:10.1016/j.geb.2006.07.005
- A. Mukherjee, “Competition and Welfare: The Implications of Licensing,” The Manchester School, Vol. 78, No. 1, 2010, pp. 20-40. doi:10.1111/j.1467-9957.2009.02126.x
- M. Rostoker, “A Survey of Corporate Licensing”, IDEA: The Journal of Law and Technology, Vol. 24, No. 2, 1984, pp. 59-92.
- H. Hotelling, “Stability in Competition,” Economic Jour- nal, Vol. 39, No. 153, 1929, pp. 41-57. doi:10.2307/2224214
- S. Poddar and U. Sinha, “On Patent Licensing in Spatial Competition,” The Economic Record, Vol. 80, No. 249, 2004, pp. 208-218. doi:10.1111/j.1475-4932.2004.00173.x
- T. Matsumura and N. Matsushima, “On Patent Licensing in Spatial Competition with Endogenous Location Choice,” 2008. http://www.iss.u-tokyo.ac.jp/~matsumur/LI.pdf
- X. H. Wang, “Fee versus Royalty Licensing in a Cournot Duopoly Model,” Economics Letters, Vol. 60, No. 1, 1998, pp. 55-62. doi:10.1016/S0165-1765(98)00092-5
- A. Dixit, “A Model of Duopoly Suggesting a Theory of Entry Barriers,” Bell Journal of Economics, Vol.10, No. 1, 1979, pp. 20-32. doi:10.2307/3003317
- X. H. Wang, “Fee versus Royalty Licensing in a Differentiated Cournot Duopoly,” Journal of Economics and Business, Vol. 54, No. 2, 2002, pp. 253-266. doi:10.1016/S0148-6195(01)00065-0
- C. Li and J. Song, “Technology Licensing in a Vertically Differentiated Duopoly,” Japan and the World Economy, Vol. 21, No. 2, 2010, pp. 183-190. doi:10.1016/j.japwor.2008.04.002
- T. Kabiraj and C. C. Lee, “Technology Transfer in a Duopoly with Horizontal and Vertical Product Differentia- tion,” Trade and Development Review, Vol. 4, No. 1, 2011, pp. 19-40.