Welfare reducing licensing by an outside innovator

Arijit Mukherjee; Uday Bhanu Sinha

doi:10.1007/s40505-023-00259-1

Welfare reducing licensing by an outside innovator

Arijit Mukherjee^*
, Uday Bhanu Sinha

^*Corresponding author for this work

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

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Abstract

It is commonly believed that licensing of cost reducing technology increases welfare. We show that technology licensing by an outside innovator may reduce welfare when the technology is not useful for all final goods producers. Technology licensing reduces welfare if cost reduction by the licensed technology is small and the initial cost difference of the final goods producers is large. A higher intensity of competition, either due to lower product differentiation or due to Bertrand competition instead of Cournot competition, increases the possibility of welfare reducing licensing.
© The Author(s) 2024

Original language	English
Pages (from-to)	17-24
Number of pages	8
Journal	Economic Theory Bulletin
Volume	12
Issue number	1
Online published	6 Jan 2024
DOIs	https://doi.org/10.1007/s40505-023-00259-1
Publication status	Published - Jun 2024
Externally published	Yes

Research Keywords

Auction
Fixed-fee
Outside innovator
Technology licensing
Welfare

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This full text is made available under CC-BY 4.0. https://creativecommons.org/licenses/by/4.0/

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abstract = "It is commonly believed that licensing of cost reducing technology increases welfare. We show that technology licensing by an outside innovator may reduce welfare when the technology is not useful for all final goods producers. Technology licensing reduces welfare if cost reduction by the licensed technology is small and the initial cost difference of the final goods producers is large. A higher intensity of competition, either due to lower product differentiation or due to Bertrand competition instead of Cournot competition, increases the possibility of welfare reducing licensing. {\textcopyright} The Author(s) 2024",

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AB - It is commonly believed that licensing of cost reducing technology increases welfare. We show that technology licensing by an outside innovator may reduce welfare when the technology is not useful for all final goods producers. Technology licensing reduces welfare if cost reduction by the licensed technology is small and the initial cost difference of the final goods producers is large. A higher intensity of competition, either due to lower product differentiation or due to Bertrand competition instead of Cournot competition, increases the possibility of welfare reducing licensing. © The Author(s) 2024

KW - Auction

KW - Fixed-fee

KW - Outside innovator

KW - Technology licensing

KW - Welfare

UR - https://www.webofscience.com/wos/woscc/full-record/WOS:001137200000001

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DO - 10.1007/s40505-023-00259-1

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JO - Economic Theory Bulletin

JF - Economic Theory Bulletin

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ER -

Welfare reducing licensing by an outside innovator

Abstract

Research Keywords

Publisher's Copyright Statement

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