Technology Licensing in Vertically Related Markets: A Case of Vertically-Integrated Firm

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Title:	Technology Licensing in Vertically Related Markets: A Case of Vertically-Integrated Firm
Authors:	Kao, Kuo-Feng;Din, Hong-Ren;Shih, Pei-Cyuan
Contributors:	淡江大學產業經濟學系
Keywords:	Technology Licensing;Vertically-related Markets
Date:	2012-06-30
Issue Date:	2013-01-22 09:09:27 (UTC+8)
Abstract:	In this paper, we consider the licensing behavior from an upstream firm to a vertically-integrated firm. We find that the optimal contract includes only a per-unit royalty rate when the innovation is small. Moreover, the royalty rate may be even larger than the innovation level. Under such a circumstance, the competing firms can achieve a collusive outcome through technology licensing; however, the social welfare improves. Furthermore, if the upstream firm determines the input price while dealing the licensing contract with the vertically-integrated firm, the upstream firm licenses to the vertically-integrated firm by a fixed-fee and determines a high input price to deter other downstream firms from entry. That may distort the social welfare.
Relation:	proceedings of the 87th Annual Western Economic Association Conference, 15p.
Appears in Collections:	[Graduate Institute & Department of Industrial Economics] Proceeding

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