License Auctions with Royalty Contracts for (Winners and) Losers

Thomas Giebe () and Elmar Wolfstetter ()

No 199, Discussion Papers from SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: This paper revisits the licensing of a non–drastic process innovation by an outside innovator to a Cournot oligopoly. We propose a new mechanism that combines a restrictive license auction with royalty licensing. This mechanism is more profitable than standard license auctions, auctioning royalty contracts, fixed–fee licensing, pure royalty licensing, and two-part tariffs. The key features are that royalty contracts are auctioned and that losers of the auction are granted the option to sign a royalty contract. Remarkably, combining royalties for winners and losers makes the integer constraint concerning the number of licenses irrelevant.

Keywords: patents; licensing; auctions; royalty; innovation; R&D; mechanism design (search for similar items in EconPapers)
JEL-codes: D21 D43 D44 D45 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ino, nep-ipr and nep-mic
Date: 2007-04
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Related works:
Journal Article: License auctions with royalty contracts for (winners and) losers (2008)
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Persistent link: http://EconPapers.repec.org/RePEc:trf:wpaper:199

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