Optimal Licensing Under Incomplete Information: The Case of the Inside Patent Holder

22 Pages Posted: 20 Mar 2017 Last revised: 8 Dec 2018

See all articles by Cuihong Fan

Cuihong Fan

Shanghai University of Finance and Economics

Byoung Jun

Korea University

Elmar Wolfstetter

Humboldt University of Berlin - Faculty of Economics; Korea University - College of Economics and Commerce; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: May 8, 2017

Abstract

We reconsider the inside patent holders' optimal licensing problem of non-drastic and (super-) drastic innovations under incomplete information, taking into account restrictions concerning royalty rates and the use of exclusive licenses implied by antitrust rules. We employ methods developed in the analysis of license auctions with downstream interaction and optimal control theory. Our analysis differs from the literature which assumed particular patterns of cost reductions across firms induced by the innovation and either complete information or particular probability distributions.

Suggested Citation

Fan, Cuihong and Jun, Byoung and Wolfstetter, Elmar G., Optimal Licensing Under Incomplete Information: The Case of the Inside Patent Holder (May 8, 2017). Economic Theory, Vol. 66, 2018. Available at SSRN: https://ssrn.com/abstract=2935589 or http://dx.doi.org/10.2139/ssrn.2935589

Cuihong Fan

Shanghai University of Finance and Economics ( email )

777 Guoding Road
Shanghai, AK Shanghai 200433
China

Byoung Jun

Korea University ( email )

1 Anam-dong 5 ka
Seoul, 136-701
Korea, Republic of (South Korea)

Elmar G. Wolfstetter (Contact Author)

Humboldt University of Berlin - Faculty of Economics ( email )

Institut für Wirtschaftstheorie I
Spandauer Strasse 1
Berlin
Germany
+49 30 2093 5652/3 (Phone)
+49 30 2093 5619 (Fax)

HOME PAGE: http://www2.hu-berlin.de/wt1wo/staff/wolfstetter/index.html

Korea University - College of Economics and Commerce ( email )

Anam-dong, Sungbuk-Ku
Seoul, 136-701
Korea

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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