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Optimal Licensing Strategy: Royalty or Fixed Fee?

Andrea Fosfuri and Esther Roca
Additional contact information
Andrea Fosfuri: Department of Business Administration, Universidad Carlos III de Madrid, Spain and CEPR, London, U.K.
Esther Roca: ICADE, Spain

International Journal of Business and Economics, 2004, vol. 3, issue 1, 13-19

Abstract: Licensing a cost-reducing innovation through a royalty has been shown to be superior to licensing by means of a fixed fee for an incumbent licensor. This note shows that this result relies crucially on the assumption that the incumbent licensor can sell its cost-reducing inno-vation to all industry players. If, for any reason, only some competitors could be reached through a licensing contract, then a fixed fee might be optimally chosen.

Keywords: licensing contract; Cournot competition; strategic effects (search for similar items in EconPapers)
JEL-codes: D45 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (20)

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