Document Type


Publication Date



We consider the issue of patent licensing in a linear city framework where firms are located at the end points of the city and compete in price. We consider three types of licensing arrangements, namely, auction, fixed fee, royalty; and focus on the optimal licensing strategy of an outsider patentee as well as an insider patentee. Contrary to the findings in the existing literature, first we show offering royalty is the best for the patentee when the patentee is an outsider for both drastic and non-drastic innovation. For insider patentee, offering no-license is the best when the innovation is drastic, while royalty is optimal when the innovation is non-drastic. We find incentive for innovation is higher for an outsider patentee compared to an insider patentee. We also show that overall increase in welfare due to innovation is independent of the fact that the patentee is outsider or insider in each of the drastic and nondrastic case.


This is a working version of an article accepted for publication in Economic Record following peer review. This article may not exactly replicate the final published version. The definitive publisher-authenticated version

Poddar, S., & Sinha, U. B. (2004). On patent licensing in spatial competition. Economic Record, 80(249), 2018-218.

is available online at DOI: 10.1111/j.1475-4932.2004.00173.x

Peer Reviewed



Economic Society of Australia



To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.