On Monopolistic Licensing Strategies under Asymmetric Information

Consider a research lab that owns a patent on a new technology but cannot develop a marketable final product based on the new technology. There are two downstream firms that might successfully develop the new product. If the downstream firms' benefits from being the sole supplier of the new product are private information, the research lab will sometimes sell two licenses, even though under complete information it would have sold one exclusive license. This is in contrast to the standard result that a monopolist will sometimes serve fewer, but never more buyers when there is private information. (C) 2002 Elsevier Science (USA).