“Selling Licenses for a Process Innovation: The Impact of the Product Market on the Selling Mechanism
Document Type
Article
Publication Date
January 2008
Abstract
This article considers the sale by a research lab of licences for a cost-reducing innovation. The marginal cost of a firm that wins a licence is private information and the acquisition of a licence imposes a negative externality on the other firms. The lab’s optimal revenue is determined from a class of mechanisms in which the lab selects the number of licences and the reserve price before the sale. The role of the downstream product market in the determination of the number of licences is analyzed. Furthermore, it is also shown that the optimal reserve price may be zero.
Journal Title
Canadian Journal of Economics
Volume
41
Issue
3
COinS
Comments
The definitive version is available at www.blackwell-synergy.com A previous version of this paper was circulated as "How to Commercialize Technology Using Auctions."