Optimal licensing strategy of green technology in a mixed oligopoly: Fixed fee versus royalty

Abstract

This paper develops a mixed oligopoly model to explore the optimal licensing strategy of green technology. In our model, either private firm or public firm could be the patentee. We show that when the private firm is the patentee, all the two types of licensing contracts (i.e., fixed fee and royalty) are optimal. However, when the public firm is the patentee, the fixed fee licensing is the optimal licensing contract. We examine the welfare consequence of a privatization policy under the optimal licensing contract and show that the privatization policy hinder the improvement of social welfare.