Technology Licensing Under Cournot-Bertrand Competition

In current society, the development and progress of the high-technology are increasing, and the degree of protection for the world-wide IPR (Intellectual Property Rights) is deepening. Almost all firms have great desires for the advanced knowledge in their ways towards success. Technology licensing has become the key factor to obtain advanced technology in the process of technology innovation. The licensors can increase their profits as well as the licensees can improve their technology degree.We have found that there exists the case where firms would choose different strategic variables, that is, a "Cournot-Bertrand" type model where one firm competes in output and the other competes in price. It is of practical significances for two firms to compete in the mixed-competition. However, the mixed competition model has obtained so little attentions in previous researches. In our daily life, some industries such as small car markets and Japanese electronic markets have competed in Cournot-Bertrand competition model.Under such circumstances, the paper develops a theoretical model to analyze the decision of a non-productive firm. The firm owns cost-reducing technology then decides to license to two productive firms which compete under Cournot-Bertrand competition in the market. One productive firm adjusts its production and the other chooses price as its strategy. And the two firms produce heterogeneous products. We analyze how the licensors will license their technology and how the social welfare changes. We will also discuss the choice between fixed fee and royalty fee for the technology owner.It is shown that under fixed fee contract, the non-productive firm will choose non-exclusive licensing or exclusive licensing according to the degree of the product differentiation and the technology innovation. The technology owner will choose non-exclusive technology license when the product differentiation is relatively high, or the product differentiation is relatively small and the degree of innovation is low. The technology owner will prefer to exclusive licensing in terms of the high product differentiation. If small product differentiation and high technology innovation coexist in market, the technology owner will choose firm under Bertrand competition as its licensee. To license to firm under Cournot competition is optimal when the product differentiation and the degree of product innovation are both of relatively small scale. The consumer surplus and the social welfare are optimal when the licensor licenses the technology to both firms.Under royalty contract, it is optimal for technology owner to choose non-exclusive contract, and the profit is greater if the licensor chooses the output competition firm than the price competition firm as licensee. Under two-part tariff contract, it is optimal to license to both firms. The licensor prefers the firm output competition unless the innovation degree is very high, and in that circumstance the licensor will license to the firm under price competition.Under mixed competition strategies, the fixed fee contract may be worse than the royalty contract. When the innovation degree is low, the licensor prefers the fixed fee contract; and if the innovation degree is high, the licensor will choose the fixed fee contract.In consideration of these three kinds of licensing contract, we have got that the technology owner tends to choose two-part tariff contract, and the two-part tariff contract will improve the social welfare.