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Patent licensing in a Cournot oligopoly: general results

Debapriya Sen and Yair Tauman ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper presents a comprehensive analysis of patent licensing in a Cournot oligopoly with general demand and looks at both outside and incumbent innovators. The licensing policies considered are upfront fees, unit royalties and combinations of fees and royalties (FR policies). It is shown that (i) royalties unambiguously ensure full diffusion of the innovation while diffusion is limited under upfront fees, (ii) the Cournot price is higher under royalties compared to upfront fees and the price could even exceed the post-innovation monopoly price, (iii) for generic values of magnitudes of the innovation, when the industry size is relatively large, royalties are superior to upfront fees for the innovator and (iv) for any m, there is always a non empty subset of m-drastic innovations such that for relatively large industry sizes, upfront fee policy results in higher consumer surplus as well as welfare compared to both royalty and FR policies.

Keywords: patent licensing; m-drastic innovation; royalties; upfront fees; FR policy (search for similar items in EconPapers)
JEL-codes: D4 D43 D45 L13 L24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-ind, nep-ino and nep-ipr
Date: 2018-08
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https://mpra.ub.uni-muenchen.de/88573/1/MPRA_paper_88573.pdf original version (application/pdf)

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Journal Article: Patent licensing in a Cournot oligopoly: General results (2018) Downloads
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