Speaker: Dr. 马思宇 (Siyu Ma)

Title: Licensing a Quality-Upgrading Innovation with Heterogeneous Consumers

Schedule: March 12, Tu 1:30-3:00 PM

Location: 诚明楼（Chengming Hall） RM 315

Introduction: 马思宇，北京交通大学经济管理学院助理教授，纽约州立大学石溪分校经济学博士。主要研究领域为博弈论，产业组织，微观经济理论，主要研究内容涉及版税和专利使用权转让、情报获取与竞争等，部分研究成果已在Games and Economic Behavior, International Journal of Game Theory, Review of Industrial Organization等著名国际期刊发表。

Abstract: We study a model of quality-improving innovation in industry of N firms producing homogeneous product. The innovation improves the quality of the product from Low (L) to High (H). Consumers have unit demand and are heterogeneous in their tastes for quality. Firms can produce either the H-product or the L-product but not both. All firms compete a la Cournot. The innovator, an outside entity, sells licenses either by auction or by a pre-determined fee to maximize his licensing revenue. If the innovation is drastic, the innovator is best off selling one license, driving the L-producers out of the market and create a monopoly in the H-market. For non-drastic innovations, in contrast to the results on cost-reducing innovations, if the industry size is relatively small, the innovator is better off selling licenses by a pre-set fee than by auction. In this case, the profit of L-producers may increase as the number of their competitors (licensees) increases, and, depending on the quality per dollar production cost, consumers may be worse off post innovation. The results do not hold for N large. The optimal number of licensees is bounded in N and as N grows indefinitely, (i) this number is decreasing in the quality of the H-product and is increasing in the quality of the L-product. (ii) The innovator's revenue increases in the quality of the H-product and decreases in the quality of the L-product.