Licensing Contract in a Stackelberg Model*
Year: 2005
Type: article
Abstract: We study optimal linear licensing and its social welfare implications when the innovator (patentee) is an insider that can make capacity/output commitment so as to act as a Stackelberg leader in the output market. We show that (i) the patentee's profit-maximizing licensing contract is a royalty; (ii) the optimal royalty rate is greater than the cost reduction attained by the licensed technology and is increasing in the number of competitors; (iii) optimal licensing maximizes the likelihood of technology transfer, may reduce social welfare and always makes consumers worse off; and (iv) the innovator benefits from capacity commitment, and the more competitive the output market, the greater the gains it makes by licensing. The opposite holds for consumers.
Source: Manchester School
Author: LUIGI FILIPPINI
Language: English
Subfield: Management of Technology and Innovation
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2107725708