Licensing Schemes in Endogenous Entry

Ryoko Oki ()
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Ryoko Oki: Graduate School of Economics, the University of Tokyo

Economics Bulletin, 2010, vol. 30, issue 4, 3237-3247

Abstract: This paper examines the optimal licensing scheme when the number of licensees is determined endogenously. We demonstrate that a license holder obtains monopoly profit even if the license holder uses only a fixed fee as long as the marginal cost is constant. Furthermore, we show that under free entry of licensees, a license holder can obtain monopoly profit with any combination of a positive fixed fee and a unit royalty that satisfies a certain condition. Even if the fixed fee is regulated to be a certain level, a license holder can achieve monopoly profit by means of a unit royalty. This result is in contrast with that of a case where the number of licensees is exogenously determined.

Keywords: license; endogenous entry (search for similar items in EconPapers)
JEL-codes: D4 (search for similar items in EconPapers)
Date: 2010-12-02
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