In 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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Volume (Year): 53 (2001) Issue (Month): 2 (April) Pages: 101-15 Download reference. The following formats are available: HTML
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CABALLERO-SANZÊ SEMPERE-MONERRISÊJose, Francisco & MONER-COLONQUESÊ, Rafael & SEMPERE-MONERRIS, J.J., 1994.
"Optimal Licensing in a Spatial Model,"
CORE Discussion Papers
1994031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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