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Optimal Two-part Tariff Licensing Mechanisms

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  • Marta San Martín
  • Ana I. Saracho

Abstract

type="main"> This paper studies the optimal two-part tariff licensing contract for an internal patentee in a differentiated Cournot duopoly. We find that the type of the royalty payment, whether ad valorem or per-unit, that it is optimal for the patentee depends on the kind of goods produced in the industry, more precisely on whether they are substitutes or complements and on the degree of product differentiation. We also find that licensing always increases social welfare, although it may hurt consumers.

Suggested Citation

  • Marta San Martín & Ana I. Saracho, 2015. "Optimal Two-part Tariff Licensing Mechanisms," Manchester School, University of Manchester, vol. 83(3), pages 288-306, June.
    • Handle: RePEc:bla:manchs:v:83:y:2015:i:3:p:288-306
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    File URL: http://hdl.handle.net/10.1111/manc.12059
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    References listed on IDEAS

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    Cited by:

    1. Montinaro, Marta & Scrimitore, Marcella, 2019. "Per unit and ad valorem royalties in a patent licensing game," MPRA Paper 96642, University Library of Munich, Germany.
    2. Kim, Seung-Leul & Lee, Sang-Ho, 2021. "Optimal tariffs with emissions taxes under non-restrictive two-part licensing strategies by a foreign eco-competitor," MPRA Paper 108496, University Library of Munich, Germany.
    3. Tarun Kabiraj, 2018. "Fee vs. Royalty Licensing and Consumers’ Welfare," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 16(3), pages 749-767, September.
    4. Antelo, Manel & Bru, Lluís, 2022. "Licensing in a Stackelberg industry, product differentiation, and welfare," MPRA Paper 114181, University Library of Munich, Germany.
    5. Stefano Colombo & Luigi Filippini, 2016. "Revenue royalties," Journal of Economics, Springer, vol. 118(1), pages 47-76, May.
    6. Ma, Siyu & Sen, Debapriya & Tauman, Yair, 2022. "Optimal patent licensing: from three to two part tariffs," MPRA Paper 111624, University Library of Munich, Germany.
    7. Siyu Ma & Yair Tauman, 2021. "Licensing of a New Product Innovation with Risk Averse Agents," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 59(1), pages 79-102, August.
    8. John Heywood & Zheng Wang, 2015. "How to license a transport innovation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(2), pages 485-500, December.
    9. Fan, Cuihong & Jun, Byoung Heon & Wolfstetter, Elmar G., 2018. "Per unit vs. ad valorem royalty licensing," Economics Letters, Elsevier, vol. 170(C), pages 71-75.
    10. Kabiraj, Abhishek & Kabiraj, Tarun, 2017. "Tariff induced licensing contracts, consumers’ surplus and welfare," Economic Modelling, Elsevier, vol. 60(C), pages 439-447.
    11. Ray-Yun Chang & Yan-Shu Lin & Jin-Li Hu, 2015. "Mixed Competition and Patent Licensing," Australian Economic Papers, Wiley Blackwell, vol. 54(4), pages 229-249, December.

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