Optimal Licensing of Non-Drastic and (Super-)Drastic Innovations: The Case of the Inside Patent Holder

Cuihong Fan (), Byoung Heon Jun () and Elmar Wolfstetter
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Cuihong Fan: Shanghai University of Finance and Economics
Byoung Heon Jun: Korea University, Seoul

No 1610, Discussion Paper Series from Institute of Economic Research, Korea University

Abstract: We reconsider the inside innovators¡¯ optimal licensing problem, assuming incomplete information and unit cost profiles that may or may not have the potential to propel a monopoly, taking into account restrictions concerning royalty rates and the use of exclusive licenses implied by antitrust rules. We analyze optimal licensing mechanisms using methods developed in the analysis of license auctions with downstream interaction. The optimal mechanism differs significantly from the mechanisms reported in the literature, which assumed complete information or particular cost profiles or probability distributions.

Keywords: Innovation; licensing; optimal contracts; asymmetric information (search for similar items in EconPapers)
JEL-codes: D21 D43 D44 D45 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-com, nep-ino, nep-ipr and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:iek:wpaper:1610

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