Optimal Licensing Policy in Differentiated Industries

14 Pages Posted: 29 Mar 2005

See all articles by Nisvan Erkal

Nisvan Erkal

University of Melbourne - Faculty of Business and Economics

Abstract

This paper analyses the policy implications of licensing between producers of differentiated goods. We consider and compare two-part tariff, fixed fee royalty and collusive licensing contracts. Under the optimal licensing policy, there will be no technology transfers if the innovation size is sufficiently small and degree of product differentiation is sufficiently low. Licensing deals that involve drastic innovations are always socially desirable. In the limit, as product differentiation converges to zero, it becomes socially desirable to transfer drastic innovations only. The range of innovation sizes that is socially optimal to transfer increases as product differentiation increases.

Suggested Citation

Erkal, Nisvan, Optimal Licensing Policy in Differentiated Industries. Available at SSRN: https://ssrn.com/abstract=689206

Nisvan Erkal (Contact Author)

University of Melbourne - Faculty of Business and Economics ( email )

Victoria, 3010
Australia
+61 3 8344 3307 (Phone)
+61 3 8344 6899 (Fax)

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