Journal of Economics

, Volume 99, Issue 3, pp 267–276 | Cite as

Location equilibrium with asymmetric firms: the role of licensing

  • Toshihiro Matsumura
  • Noriaki Matsushima
  • Giorgos Stamatopoulos
Article

Abstract

It is known that if exogenous cost heterogeneities between the firms in a spatial duopoly model are large, then the model does not have a pure-strategy equilibrium in location choices. It is also known that when these heterogeneities are stochastically determined after firms choose their locations, spatial agglomeration can appear. To tackle these issues, the current paper modifies the spatial framework by allowing firms to exchange the cost-efficient production technology via royalties. It is shown that technology transfer guarantees the existence of a location equilibrium in pure strategies and that maximum differentiation appears in the market.

Keywords

Location model Asymmetric firms Licensing Royalty R&D 

JEL Classification

D43 D45 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Anderson SP, Neven DJ (1991) Cournot competition yields spatial agglomeration. Int Econ Rev 32: 793–809CrossRefGoogle Scholar
  2. Beggs AW (1992) The licensing of patents under asymmetric information. Int J Ind Organ 10: 171–191CrossRefGoogle Scholar
  3. Choi JP (2001) Technology transfer with moral hazard. Int J Ind Organ 19: 249–266CrossRefGoogle Scholar
  4. Christou C, Vettas N (2005) Location choices under quality uncertainty. Math Social Sci 50: 268–278CrossRefGoogle Scholar
  5. D’ Aspremont C, Gabszewicz J, Thisse JF (1979) On Hotelling’s “Stability in Competition”. Econometrica 47: 1145–1150CrossRefGoogle Scholar
  6. Faulí-Oller R, Sandonís J (2002) Welfare reducing licensing. Games Econ Behav 41: 192–205CrossRefGoogle Scholar
  7. Filippini L (2005) Licensing contract in a Stackelberg model. Manchester School 73: 582–598CrossRefGoogle Scholar
  8. Gallini NT, Wright BD (1990) Technology transfer under asymmetric information. RAND J Econ 21: 147–160CrossRefGoogle Scholar
  9. Hamilton JH, Thisse JF, Weskamp A (1989) Spatial discrimination: Bertrand vs. Cournot in a model of location choice. Reg Sci Urban Econ 19: 87–102CrossRefGoogle Scholar
  10. Kabiraj T (2004) Patent licensing in a leadership structure. Manchester School 72: 188–205CrossRefGoogle Scholar
  11. Kamien MI, Tauman Y (1984) The private value of a patent: a game theoretic analysis, Z. Nationalökon. 4(Suppl): 93–118Google Scholar
  12. Kamien MI, Tauman Y (1986) Fees versus royalties and the private value of a patent. Q J Econ 101: 471–491CrossRefGoogle Scholar
  13. Kamien MI, Tauman Y (2002) Patent licensing: the inside story. Manchester School 70: 7–15CrossRefGoogle Scholar
  14. Katz ML, Shapiro C (1985) On the licensing of innovations. RAND J Econ 16: 504–520CrossRefGoogle Scholar
  15. Katz ML, Shapiro C (1986) How to license intangible property. Q J Econ 101: 567–589CrossRefGoogle Scholar
  16. Macho-Stadler I, Pérez-Castrillo JD (1991) Contrats de licence et asymétrie d’ information. Ann Econ Statist 24: 189–208Google Scholar
  17. Marjit S (1990) On a non-cooperative theory of technology transfer. Econ Lett 33: 293–298CrossRefGoogle Scholar
  18. Matsumura T, Matsushima N (2009) Cost differentials and mixed strategy equilibria in a Hotelling model. Ann Reg Sci 43: 215–234CrossRefGoogle Scholar
  19. Mayer T (2000) Spatial Cournot competition and heterogeneous production costs across locations. Reg Sci Urban Econ 30: 325–352CrossRefGoogle Scholar
  20. Mukherjee A (2001) Technology transfer with commitment. Econ Theory 17: 345–369CrossRefGoogle Scholar
  21. Muto S (1993) On licensing policies in Bertrand competition. Games Econ Behav 5: 257–267CrossRefGoogle Scholar
  22. Saracho AI (2002) Patent licensing under strategic delegation. J Econ Manage Strategy 11: 225–251CrossRefGoogle Scholar
  23. Sen D, Tauman Y (2007) General licensing schemes for a cost-reducing innovation. Games Econ Behav 59: 163–186CrossRefGoogle Scholar
  24. Sen D (2005) Fee versus royalty re-considered. Games Econ Behav 53: 141–147CrossRefGoogle Scholar
  25. Shapiro C (1985) Patent licensing and R&D rivalry. Am Econ Rev Pap Proc 75: 25–30Google Scholar
  26. Wang XH (1998) Fee versus royalty licensing in a Cournot duopoly model. Econ Lett 60: 55–62CrossRefGoogle Scholar
  27. Ziss S (1993) Entry deterrence, cost advantage and horizontal product differentiation. Reg Sci Urban Econ 23: 523–543CrossRefGoogle Scholar

Copyright information

© Springer-Verlag 2009

Authors and Affiliations

  • Toshihiro Matsumura
    • 1
  • Noriaki Matsushima
    • 2
  • Giorgos Stamatopoulos
    • 3
  1. 1.Institute of Social ScienceUniversity of TokyoTokyoJapan
  2. 2.Institute of Social and Economic ResearchOsaka UniversityOsakaJapan
  3. 3.Department of EconomicsUniversity of CreteRethymnoGreece

Personalised recommendations