Licensing Under Network Externalities

Kuang Cheng Andy Wang, Wen Jung Liang, Chun Hung A. Lin*

*Corresponding author for this work

Research output: Contribution to journalJournal Article peer-review

8 Scopus citations

Abstract

This paper develops a duopoly model to explore licensing behaviour in the presence of network externalities. Under the assumption that the licensor and the licensee compete in a duopolistic market, we obtain the following results. First, the larger the network-externality effect, the more likely it is that the licensor will prefer fixed-fee licensing to royalty licensing. Second, the larger the network-externality effect, the more likely it is that the optimal royalty rate will be smaller than the reduction in marginal costs from innovation under a royalty licensing arrangement.

Original languageEnglish
Pages (from-to)585-593
Number of pages9
JournalEconomic Record
Volume88
Issue number283
DOIs
StatePublished - 12 2012

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