Premium
TECHNOLOGY TRANSFER IN A STACKELBERG STRUCTURE: LICENSING CONTRACTS AND WELFARE
Author(s) -
KABIRAJ TARUN
Publication year - 2005
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2005.00421.x
Subject(s) - stackelberg competition , welfare , incentive , economics , technology transfer , product (mathematics) , product innovation , industrial organization , product market , market structure , microeconomics , market economy , international trade , geometry , mathematics
We study the question of optimal licensing contracts in a leadership structure and discuss the welfare implications. We assume that the size of the innovation is exogenous and the patent holder is a competitor in the product market. Then welfare depends on the types of contracts available and on the ownership of patents. In particular, we examine whether a leader's innovation is considered to be socially more valuable than a follower's innovation. We show that there are situations when a follower's innovation generates larger welfare. Given the private incentives for innovation, a licensing policy may induce the desired firm to win the patent race.