We show the impact of technology licensing on optimal patent policy. Strong patent protection that eliminates imitation may not be the equilibrium outcome in the presence of licensing. Depending on the cost of innovation, licensing may either increase or reduce the strength of the patent protection

We show that even if information transmission through an honest outside agency is not possible due to the possibility of collusion between the firms and the outside agency, information transmission is still possible through technology licensing. However, unlike the case of a cost-free honest...

The theoretical literature demonstrates that excess capacity is not an equilibrium phenomenon if each firm’s marginal revenue decreases with the competitor's output. We show that such a conclusion can be overturned in the presence of technology licensing. We show that in the presence of...

The issue of optimal patent protection is of great importance since the inclusion of the trade related aspects of intellectual property rights accord into the purview of the World Trade Organization. Hitherto, the literature has focused on the optimal patent regimes from the perspective of...

This article considers the sale by a research lab of licenses for a cost-reducing innovation. The marginal cost of a firm that wins a license is private information and the acquisition of a license imposes a negative externality on the other firms. The lab's optimal revenue is determined from a...