Stable licensing schemes in technology transfer

Abstract

AbstractBy considering combinations of a lump‐sum fee and a per‐unit royalty as licensing schemes in the transfer of new technology through licensing from a technology holder to oligopolistic firms, we investigate stable licensing schemes that are realized as bargaining outcomes. The licensing schemes agreeable to both the technology holder and licensees are necessarily rejection‐proof; that is, no subgroup of licensees has an incentive to reject the licensing schemes. We newly define the rejection‐proof core for each group of licensees as the set of rejection‐proof licensing schemes for its group that are not dominated by any other rejection‐proof licensing schemes for any licensees' group. Our principal findings are as follows: For the group of licensees that maximizes the sum of the technology holder's (gross) profit and licensees' total surplus, the rejection‐proof core is always nonempty. Furthermore, from the perspective of profit maximization, the nonempty rejection‐proof cores suggest that the technology holder should license the new technology to such a group.