Per unit and ad valorem royalties in a patent licensing game

Marta Montinaro and Marcella Scrimitore

MPRA Paper from University Library of Munich, Germany

Abstract: In a context of product innovation, we study two-part tariff licensing between a patentee and a potential rival which compete in a differentiated product market characterized by network externalities. The latter are shown to crucially affect the relative profitability of Cournot vs. Bertrand when a per unit royalty is applied. By contrast, we find that Cournot yields higher profits than Bertrand under ad valorem royalties, regardless of the strength of network effects.

Keywords: licensing; product innovation; bertrand vs. cournot; network effects (search for similar items in EconPapers)
JEL-codes: D43 L13 L20 (search for similar items in EconPapers)
Date: 2019-03-06
New Economics Papers: this item is included in nep-bec, nep-com, nep-gth, nep-ind, nep-ino, nep-ipr, nep-mic and nep-ore
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