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Licensing Essential Patents: The Non‐Discriminatory Commitment and Hold‐Up

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  • Youping Li
  • Jie Shuai

Abstract

Licensors of patents essential to a standard are often required to license on reasonable and non‐discriminatory (RAND) terms. Using a model with owners of essential patents and licensees who invest into standard‐conforming technologies, this paper demonstrates that the non‐discriminatory commitment alleviates the hold‐up problem. Moreover, it improves consumer and social welfare, and promotes upstream innovation as licensing revenue is increased. In an extended model with each licensor independently choosing whether to make the commitment, all licensors voluntarily commit in the unique equilibrium.

Suggested Citation

  • Youping Li & Jie Shuai, 2019. "Licensing Essential Patents: The Non‐Discriminatory Commitment and Hold‐Up," Journal of Industrial Economics, Wiley Blackwell, vol. 67(1), pages 37-55, March.
    • Handle: RePEc:bla:jindec:v:67:y:2019:i:1:p:37-55
    DOI: 10.1111/joie.12177
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    Cited by:

    1. Shohei Yoshida, 2018. "Bargaining power and firm profits in asymmetric duopoly: an inverted-U relationship," Journal of Economics, Springer, vol. 124(2), pages 139-158, June.
    2. Tsuritani, Ryosuke, 2023. "Strategic Input Price Discrimination with Horizontal Shareholding," MPRA Paper 121176, University Library of Munich, Germany.
    3. Marc Escrihuela‐Villar & Walter Ferrarese, 2022. "Asymmetric input contracts under price leadership," Manchester School, University of Manchester, vol. 90(1), pages 77-91, January.
    4. Kangsik Choi & DongJoon Lee & Seonyoung Lim, 2022. "A Note on Input Price Discrimination Under Bertrand Competition: Simultaneous vs. Sequential Contracting," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 61(2), pages 223-246, September.
    5. Youping Li & Jie Shuai, 2022. "Input price discrimination and horizontal shareholding," Journal of Regulatory Economics, Springer, vol. 61(1), pages 48-66, February.

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