The Relevance of Bargaining for the Licensing of a Cost-Reducing Innovation
AbstractIn the context of a Cournot duopoly, this paper studies the licensing of a cost-reducing innovation by means of three possible allocation mechanisms: auction, fixed fee, and direct negotiation. Once the use of an arbitrary reserve price (which is not credible) has been excluded, it is no longer true that auction always yields higher profit to the patentee than a fixed fee. However, the authors propose a direct negotiation that restores the patentee's profit to the level of an auction with an arbitrary reserve price (which is unimplementable). Direct negotiation is superior to both an auction with a nonarbitrary reserve price and a fixed fee. From the social point of view, however, licensing with a fixed fee is the best option. Copyright 2001 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Bulletin of Economic Research.
Volume (Year): 53 (2001)
Issue (Month): 2 (April)
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- Stephen C. Hansen & John S. Hughes, 2005. "The Dissemination of Management Consulting Innovations and the Pace of Technological Improvements," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(3), pages 536-, September.
- Arijit Mukherjee & Yingyi Tsai, 2013. "Technology licensing under optimal tax policy," Journal of Economics, Springer, vol. 108(3), pages 231-247, April.
- MAULEON, Ana & VANNETELBOSCH, Vincent & VERGARI, Cecilia, 2010. "Bargaining and delay in patent licensing," CORE Discussion Papers 2010077, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Naoki Watanabe & Shigeo Muto, 2008. "Stable profit sharing in a patent licensing game: general bargaining outcomes," International Journal of Game Theory, Springer, vol. 37(4), pages 505-523, December.
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