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Optimal Licensing Contracts and the Value of a Patent

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  • Can Erutku
  • Yves Richelle
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    Abstract

    "We extend Kamien and Tauman's (1986) analysis of the value of a patent. We find that an inventor can always design a fixed fee plus royalty contract such that his revenue is equal to the profit a monopoly endowed with the innovation could make on the market. This implies that the social value of a patent can be strictly negative whenever the patented innovation is of bad quality. We also explain why a principal can have an interest in using performance-based contracts although the principal and the agents are risk-neutral, information is symmetric, and agents' actions are verifiable." Copyright 2007, The Author(s) Journal Compilation (c) 2007 Blackwell Publishing.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.

    Volume (Year): 16 (2007)
    Issue (Month): 2 (06)
    Pages: 407-436

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    Handle: RePEc:bla:jemstr:v:16:y:2007:i:2:p:407-436

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    Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/

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    Web: http://www.blackwellpublishing.com/journal.asp?ref=1058-6407&site=1

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    Cited by:
    1. San Martín Lizarralde, Marta & Saracho de la Torre, Ana Isabel, 2012. "Two-part tariff licensing mechanisms," IKERLANAK Ikerlanak;2012-59, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    2. Manel Antelo, 2009. "On contract duration of royalty licensing contracts," Spanish Economic Review, Springer, vol. 11(4), pages 277-299, December.
    3. C. Erutku & A. Priegue Freire & Y. Richelle, 2007. "Licensing Innovations with Exclusive Contracts," Review of Industrial Organization, Springer, vol. 31(4), pages 261-273, December.
    4. Meniere, Yann & Parlane, Sarah, 2010. "Decentralized licensing of complementary patents: Comparing the royalty, fixed-fee and two-part tariff regimes," Information Economics and Policy, Elsevier, vol. 22(2), pages 178-191, May.
    5. Ramón Faulí-Oller & Joel Sandonís, 2008. "Optimal Two-Part Tariff Licensing Contracts with Differentiated Goods and Endogenous R&D," Working Papers. Serie AD 2008-12, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    6. Arijit Mukherjee, 2014. "Licensing under convex costs," Journal of Economics, Springer, vol. 111(3), pages 289-299, April.
    7. Jelnov, Artyom & Tauman, Yair, 2009. "The private value of a patent: A cooperative approach," Mathematical Social Sciences, Elsevier, vol. 58(1), pages 84-97, July.
    8. Kishimoto, Shin & Watanabe, Naoki & Muto, Shigeo, 2011. "Bargaining outcomes in patent licensing: Asymptotic results in a general Cournot market," Mathematical Social Sciences, Elsevier, vol. 61(2), pages 114-123, March.
    9. Muthers, Johannes & Inceoglu, Firat & Doganoglu, Toker, 2013. "Licensing with Free Entry," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79757, Verein für Socialpolitik / German Economic Association.
    10. Xue, Minggao & Su, Lili, 2011. "Licensing to a durable-good duopoly in patent litigation," Economic Modelling, Elsevier, vol. 28(3), pages 1186-1194, May.
    11. L. Filippini & C. Vergari, 2012. "Product innovation in a vertically differentiated model," Working Papers wp833, Dipartimento Scienze Economiche, Universita' di Bologna.

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