The Capacity Constraint and the Patent Licensing

Abstract

The present research investigates how the capacity constraint may impact the innovator’s optimal licensing decision in a Cournot duopoly An outside innovator may prefer to license to just one of the producing firms when they face capacity constraints On the contrary the inside innovator may prefer fixed fee to royalty licensing These sharp contrasts compared to the classic findings in Kamien and Tauman (1984 1986) and Wang (1998) prove the importance of the capacity constraint on the optimal licensing decision We further show that the less symmetric the distribution of capacity constraints is between the producers the less efficient the market equilibrium will be and the lower revenue the outside innovator will generate from licensing its cost reducing technology Moreover we also investigate the optimal two-part tariff licensing under capacity constraint

Date of Award	2014 Sept 1
Original language	English
Supervisor	Ming-Hung Weng (Supervisor)