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A Macroeconomic Model of Imperfect Competition with Patent Licensing

A Macroeconomic Model of Imperfect Competition with Patent Licensing AbstractThis paper sets up an imperfectly competitive macroeconomic model that features the strategic interaction between the patent-holding firm and licensees, and uses it to analyze the relevant macro-variables under various licensing arrangements. Some main findings emerge from the analysis. First, the equilibrium aggregate output and aggregate consumption under fixed-fee and royalty licensing regimes are always greater than those under the no licensing regime. Moreover, the equilibrium aggregate output and consumption under the fixed-fee licensing regime are always greater than those under the royalty licensing regime. Second, with the higher (lower) technology level the patent holder prefers the fixed-fee (royalty) contract. Third, welfare could be improved through technology transfer, and the level of welfare under the fixed-fee licensing regime is higher than that under the royalty licensing regime. Lastly, this paper discusses some extensions of the baseline model. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The B.E. Journal of Economic Analysis & Policy de Gruyter

A Macroeconomic Model of Imperfect Competition with Patent Licensing

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Publisher
de Gruyter
Copyright
©2015 by De Gruyter
ISSN
1935-1682
eISSN
1935-1682
DOI
10.1515/bejeap-2013-0144
Publisher site
See Article on Publisher Site

Abstract

AbstractThis paper sets up an imperfectly competitive macroeconomic model that features the strategic interaction between the patent-holding firm and licensees, and uses it to analyze the relevant macro-variables under various licensing arrangements. Some main findings emerge from the analysis. First, the equilibrium aggregate output and aggregate consumption under fixed-fee and royalty licensing regimes are always greater than those under the no licensing regime. Moreover, the equilibrium aggregate output and consumption under the fixed-fee licensing regime are always greater than those under the royalty licensing regime. Second, with the higher (lower) technology level the patent holder prefers the fixed-fee (royalty) contract. Third, welfare could be improved through technology transfer, and the level of welfare under the fixed-fee licensing regime is higher than that under the royalty licensing regime. Lastly, this paper discusses some extensions of the baseline model.

Journal

The B.E. Journal of Economic Analysis & Policy – de Gruyter

Published: Oct 1, 2015

Keywords: imperfect competition; macroeconomic model; fixed-fee licensing; royalty licensing; D45; E10; L16

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