Licensing policies for a new product |
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Authors: | Francisco Caballero-sanz José J Sempere-monerris |
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Institution: | 1. European Commission, Directorate-General Internal Market and Services , B-1049, Brussels, Belgium;2. Department of Economic Analysis , University of Valencia , Campus dels Tarongers, avda. dels Tarongers s/n, E-46022, Valencia, Spain |
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Abstract: | This paper studies licensing policies for the owner of a new product and addresses their welfare impact in the assessment of market failures. We show that the best licensing policy for the patent holder is fixed fee licensing with an exclusive territory clause. Consumers are also better off with fixed fees but do not prefer the exclusive territory clause. Social welfare is higher under exclusive territories when fixed costs are not too large. As for efficiency, the number of licences in the private market equilibrium falls short of the socially optimal solution. Our analysis discloses that (i) any policy measures aimed at enhancing the diffusion of technology, in terms of the number of licences, would be welcomed and, (ii) the permissive treatment received by licensing agreements with exclusive territories is justified. |
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Keywords: | Licensing Exclusive territories Market failure |
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