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Cover of: Choosing a Production Joint Venture Partner
Rong Ding, Chiu Yu Ko, Bo Shen

Choosing a Production Joint Venture Partner

Section: Articles
Volume 176 (2020) / Issue 4, pp. 665-685 (21)
Published 10.07.2020
DOI 10.1628/jite-2020-0039
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  • 10.1628/jite-2020-0039
We study how a firm inside or outside an industry selects a partner among asymmetric firms to form a production joint venture (PJV), in which technology transfer takes place. We show that the partner selected under a two-part tariff contractis always (weakly) more efficient than the one selected under a first-price auction. Comparing these two schemes, we find that a two-part tariff contract can be superior for the most efficient incumbent firm or for an outside innovator, while a first-price auction is always superior for the least efficient incumbent firm. Moreover, in terms of consumer surplus and welfare, two-part tariff contract is always (weakly) superior.