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Per Unit and Ad Valorem Royalties in a Patent Licensing Game

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  • Montinaro, Marta
  • Pal, Rupayan
  • Scrimitore, Marcella

Abstract

In a context of product innovation, we study two-part tariff licensing between a patentee and a potential rival which compete in a differentiated product market characterized by network externalities. The latter are shown to crucially affect the relative profitability of Cournot vs. Bertrand when a per unit royalty is applied. By contrast, we find that Cournot yields higher profits than Bertrand under ad valorem royalties, regardless of the strength of network effects.

Suggested Citation

  • Montinaro, Marta & Pal, Rupayan & Scrimitore, Marcella, 2020. "Per Unit and Ad Valorem Royalties in a Patent Licensing Game," FACTS: Firms And Cities Towards Sustainability 307305, Fondazione Eni Enrico Mattei (FEEM) > FACTS: Firms And Cities Towards Sustainability.
    • Handle: RePEc:ags:feemff:307305
    DOI: 10.22004/ag.econ.307305
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    1. Antelo, Manel & Bru, Lluís, 2022. "Licensing in a Stackelberg industry, product differentiation, and welfare," MPRA Paper 114181, University Library of Munich, Germany.

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    Keywords

    Production Economics;

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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