Abstract
I study the prospects for collusion between rival firms which share technological know-how. Two common forms of technology sharing are compared: a research joint venture (RJV) and licensing. Under licensing, firms can use the licensing fee to elicit higher levels of R&D than with the RJV. However, firms must also be induced to license innovations ex post. For a broad set of cases, licensing yields higher collusive profits to firms and higher prices to consumers. In other cases, licensing can only be induced if the license fee is very high, leading to excessive R&D and lower profits. In these cases the colluding firms prefer to share technology through an RJV.
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