Abstract
We show the effects of product differentiation and product market competition on technology licensing by an outside innovator. For a certain range of product differentiation, both the innovator and the society prefer royalty licensing compared to auction (or fixed-fee), irrespective of Cournot and Bertrand competitions, if the number of potential licensees is sufficiently large. Hence, for such a range of product differentiation, neither the innovator nor the antitrust authority requires information about the type of product market competition in choosing the type of the licensing contract.
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