Licensing a product innovation in a Cournot industry

Manel Antelo and Lluis Bru

MPRA Paper from University Library of Munich, Germany

Abstract: We study how a firm licenses a product improvement innovation to its rival in the final market. Contrary to what happens with fixed-fee licensing or per-unit royalty licensing, pure ad-valorem royalty licensing is optimal but is welfare reducing. On welfare grounds, fixed-fee licensing dominates per-unit royalty agreements, but has the disadvantage that firms sometimes fail to reach an agreement if licensing deals are restricted to feature fixed fees. A simple rule for a second-best optimal policy on technology licensing is proposed.

Keywords: Product innovation; licensing; Cournot competition; welfare (search for similar items in EconPapers)
JEL-codes: D43 D45 (search for similar items in EconPapers)
Date: 2023-01-10
New Economics Papers: this item is included in nep-com, nep-gth, nep-ind, nep-ipr and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:116631

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