Choosing a licensee from heterogeneous rivals

Anthony Creane, Chiu Yu Ko, Hideo Konishi

Research output: Contribution to journalArticlepeer-review

11 Scopus citations

Abstract

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.

Original languageEnglish
Pages (from-to)254-268
Number of pages15
JournalGames and Economic Behavior
Volume82
DOIs
StatePublished - Nov 2013

Keywords

  • Licensing
  • Technology transfer

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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