Network Effects and Technology Licensing with Fixed Fee, Royalty, and Hybrid Contracts

2006 ◽  
Vol 23 (2) ◽  
pp. 91-118 ◽  
Author(s):  
Lihui Lin ◽  
Nalin Kulatilaka
Keyword(s):  
Network Effects ◽  
Technology Licensing ◽  
Fixed Fee

scholarly journals Technology Licensing Strategy for Network Product in a Service Industry

2015 ◽  
Vol 2015 ◽  
pp. 1-17 ◽  
Author(s):  
Xianpei Hong ◽  
Dan Zhao ◽  
Haiqing Hu ◽  
Shuang Song
Keyword(s):  
Product Differentiation ◽  
Service Provider ◽  
Optimal Strategy ◽  
Network Effects ◽  
Technology Innovation ◽  
Service Industry ◽  
Service Providers ◽  
Technology Licensing ◽  
Significant Attention ◽  
Fixed Fee

Technology licensing has gained significant attention in literature and practice as a rapid and effective way to improve firm’s capability of technology innovation. In this paper, we investigate a duopolistic service provider competition market, where service providers develop and sell a kind of network product. In this setting, we analyze the innovating service provider’s four licensing strategies: no licensing, fixed fee licensing, royalty licensing, and two-part tariff licensing. The literature suggests that when the network products can be completely substituted, two-part tariff licensing is the optimal strategy of the innovating service provider. We find that when the network products cannot be completely substituted, two-part tariff licensing is not always optimal. The degree of the product differentiation, the intensity of the network effects, and the R&D cost of the potential licensee play a key role in determining the innovating service provider’s optimal licensing strategies.

LICENSING BY OUTSIDE INNOVATOR IN HOTELLING MODEL REVISITED

2021 ◽  
pp. 2150041
Author(s):  
YUANZHU LU ◽  
FULAN WU
Keyword(s):  
Technology Licensing ◽  
Economic Modelling ◽  
Hotelling Model ◽  
Royalty Rates ◽  
Optimal Technology ◽  
The Cost ◽  
Cost Differentials ◽  
Fixed Fee

This paper extends Banerjee and Poddar [Banerjee, S and S Poddar (2019). ‘To sell or not to sell’: Licensing versus selling by an outside innovator. Economic Modelling, 76, 293–304] by lifting the cap on per unit royalty rates in the cases of royalty licensing and two-part tariff licensing. We reconsider the optimal technology licensing contract by an outside innovator facing two heterogeneous licensees in a standard Hotelling framework. Our findings show that the optimal licensing policy could be fixed fee to the efficient firm, or two-part tariff to both firms (pure royalty to both firms), or two-part tariff to the efficient firm, depending upon the cost differentials between the firms and the size of innovation.

scholarly journals Technology Licensing between Rival Firms in Presence of Asymmetric Information

2017 ◽  
Vol 17 (1) ◽  
Author(s):  
Neelanjan Sen ◽  
Sukanta Bhattacharya
Keyword(s):  
Asymmetric Information ◽  
Low Cost ◽  
Technology Licensing ◽  
Cournot Duopoly ◽  
Cost Difference ◽  
Cost Information ◽  
Rival Firms ◽  
The Cost ◽  
Duopoly Market ◽  
Fixed Fee

AbstractThis paper investigates the possibility of licensing between rival firms in a Cournot duopoly market. Unlike Heywood, Li, and Ye (2014. “Per Unit vs. Ad Valorem Royalties under Asymmetric Information.” International Journal of Industrial Organization 37:38–46), the cost information of the licensee is private in the pre-licensing stage. If inspection of the licensee’s technology is not possible by the licensor i) technology is never transferred from the low-cost firm (licensor) to the high-cost firm (licensee) via fixed-fee and ii) in the case of royalty licensing technology will be transferred only if the cost difference between the firms is sufficiently high. Moreover, under fixed-fee and royalty licensing, the licensee will always allow the licensor to inspect its technology, if inspection is possible. If inspection is undertaken by the licensor, technology will be transferred i) if the cost difference is low via fixed fee and ii) always via royalty.

Technology Licensing in a Network Product Market: Fixed-Fee versus Royalty Licensing

2018 ◽  
Vol 94 (305) ◽  
pp. 168-185 ◽  
Author(s):  
Huaige Zhang ◽  
Xuejun Wang ◽  
Xianpei Hong ◽  
Qiang Steven Lu
Keyword(s):  
Product Market ◽  
Technology Licensing ◽  
Fixed Fee

scholarly journals On the Sustainability of Technology Licensing Under Asymmetric Information Game

2019 ◽  
Vol 11 (24) ◽  
pp. 6959
Author(s):  
Chien-Shu Tsai ◽  
Ting-Chung Tsai ◽  
Po-Sheng Ko ◽  
Chien-Hui Lee ◽  
Jen-Yao Lee ◽  
...  
Keyword(s):  
Asymmetric Information ◽  
Cost Saving ◽  
Past Research ◽  
Technology Licensing ◽  
Market Size ◽  
Optimum Strategy ◽  
Fixed Fee

Past research indicates that a licensor tends to adopt the fixed fee, in order to obtain higher profit rather than secure royalty when he participates in zero production in the market. This study instead finds that the patentee’s optimum strategy may vary. In addition to the fixed-fee strategy, royalty or mixed licensing, or fixed fee plus royalty may be potential choices for the patentee as well which is depend on the market scale, incidence of market scale, and magnitude of cost-saving. The patentee may choose to only authorize a type of high market size based on self-interested motives. The technology licensing market is not sustainable.

scholarly journals Technology Licensing by Advertising Supported Media Platforms: An Application to Internet Search Engines

2011 ◽  
Vol 11 (1) ◽  
Author(s):  
Geza Sapi ◽  
Irina Suleymanova
Keyword(s):  
Network Effects ◽  
Technology Licensing ◽  
Decision Variable ◽  
Internet Search ◽  
Advertising Intensity ◽  
Nature Of Technology ◽  
Advanced Technologies ◽  
Indirect Network Effects ◽  
Duopoly Model

Abstract We develop a duopoly model with advertising supported platforms and analyze incentives of a superior firm to license its advanced technologies to an inferior rival. We highlight the role of two technologies characteristic for media platforms: the technology to produce content and to place advertisements. Licensing incentives are driven solely by indirect network effects arising from the aversion of users to advertising. We establish a relationship between licensing incentives and the nature of technology, the decision variable on the advertiser side, and the structure of platforms’ revenues. Only the technology to place advertisements is licensed. If users are charged for access, licensing incentives vanish. Licensing increases the advertising intensity, benefits advertisers and harms users. Our model provides a rationale for technology-based cooperations between competing platforms, such as the planned Yahoo-Google advertising agreement in 2008.

DECISION MAKING ON STRATEGIC ENVIRONMENTAL TECHNOLOGY LICENSING: FIXED-FEE VERSUS ROYALTY LICENSING METHODS

2009 ◽  
Vol 08 (03) ◽  
pp. 609-624 ◽  
Author(s):  
MING-CHUNG CHANG ◽  
JIN-LI HU ◽  
GWO-HSHIUNG TZENG
Keyword(s):  
Social Welfare ◽  
Consumer Surplus ◽  
Technology Licensing ◽  
Environmental Damage ◽  
Environmental Technology ◽  
Tax Rate ◽  
Duopoly Model ◽  
High Emission ◽  
Fixed Fee

Because of a deterioration in the quality of the environment, this paper studies the effects of the environment and the economy on environmental technology licensing in a homogeneous Cournot duopoly model in order to reduce environmental pollution and hence improve social welfare. To this end, two licensing methods — namely, a fixed-fee licensing method and a royalty licensing method — are compared. It is found that a high emission tax rate induces the innovator to not license the environmental technology to the licensee under the fixed-fee licensing method. As for social welfare, a large innovation scale of environmental technology does not guarantee that social welfare will be maximized. Finally, a large innovation scale of environmental technology is likely to increase consumer surplus if the marginal environmental damage is significant. Consumers are likely to prefer royalty licensing to fixed-fee licensing. This conclusion differs from Wang's finding in 2002.

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