TY - JOUR
T1 - Choosing a licensee from heterogeneous rivals
AU - Creane, Anthony
AU - Ko, Chiu Yu
AU - Konishi, Hideo
PY - 2013/11
Y1 - 2013/11
N2 - We examine a firm that can license its production technology to a rival when firms are heterogeneous in production costs. We show that a complete technology transfer from one firm to another always increases joint profit under weakly concave demand when at least three firms remain in the industry. A jointly profitable transfer may reduce social welfare, although a jointly profitable transfer from the most efficient firm always increases welfare. We also consider two auction games under complete information: a standard first-price auction and a menu auction by Bernheim and Whinston (1986). With natural refinement of equilibria, we show that the resulting licensees are ordered by degree of efficiency: menu auction, simple auction, and joint-profit-maximizing licensees, in (weakly) descending order.
AB - We examine a firm that can license its production technology to a rival when firms are heterogeneous in production costs. We show that a complete technology transfer from one firm to another always increases joint profit under weakly concave demand when at least three firms remain in the industry. A jointly profitable transfer may reduce social welfare, although a jointly profitable transfer from the most efficient firm always increases welfare. We also consider two auction games under complete information: a standard first-price auction and a menu auction by Bernheim and Whinston (1986). With natural refinement of equilibria, we show that the resulting licensees are ordered by degree of efficiency: menu auction, simple auction, and joint-profit-maximizing licensees, in (weakly) descending order.
KW - Licensing
KW - Technology transfer
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U2 - 10.1016/j.geb.2013.07.013
DO - 10.1016/j.geb.2013.07.013
M3 - Article
AN - SCOPUS:84883216895
SN - 0899-8256
VL - 82
SP - 254
EP - 268
JO - Games and Economic Behavior
JF - Games and Economic Behavior
ER -