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Commercialization of a demand-enhancing innovation: The release of a new apple variety by a public university

Sherzod Akhundjanov (), R. Karina Gallardo, Jill McCluskey () and Bradley J. Rickard

Economic Modelling, 2020, vol. 86, issue C, 88-100

Abstract: The upsurge of patented fruit varieties developed by university plant-breeding programs motivated this re-examination of optimal commercialization strategies when an innovator cares about profits for both itself and the licensees. Our theoretical findings suggest that the optimal licensing arrangement that maximizes weighted joint profits depends on the innovation level size, number of firms, and the weights assigned to the innovator and licensee profits. We designed an experiment to test the case with a small number of firms and found that the joint profits are the greatest under an exclusive per-unit royalty scheme. However, when the number of firms is large, as may be the case for a varietal introduction into the U.S. apple industry, our model suggests that the joint profits will be the largest under a nonexclusive contract, either with a two-part tariff, if the innovation level is high, or a per-unit royalty if the innovation level is low.

Keywords: Licensing; Patents; Apples; Land grant university (search for similar items in EconPapers)
JEL-codes: L24 O32 Q16 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:86:y:2020:i:c:p:88-100

DOI: 10.1016/j.econmod.2019.06.004

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