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Optimal Value Of A Patent In An Asymmetric Cournot Duopoly Market

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  • Uday Bhanu Sinha

    (Departments of Economics, Delhi School of Economics, University of Delhi, India)

Abstract

We consider a mechanism for optimizing the value of a patent owned by an independent patent holder who is not a producer in the market. We consider two kinds of cost reducing innovations: “common innovation” and “new technology innovation” in a homogeneous good Cournot market with ex-ante asymmetric costs of production. We show that the value of the patent is maximized when the patent holder sells the patent to the efficient firm at a fixed payment who would further license the innovation to its rival. This patent sale dominates all other licensing mechanisms for both kinds of innovations.

Suggested Citation

  • Uday Bhanu Sinha, 2015. "Optimal Value Of A Patent In An Asymmetric Cournot Duopoly Market," Working papers 245, Centre for Development Economics, Delhi School of Economics.
    • Handle: RePEc:cde:cdewps:245
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    Cited by:

    1. Madhuri H.Shastry & Uday Bhanu Sinha, 2023. "Privatization and Licensing under Public Budget Constraint," Working papers 343, Centre for Development Economics, Delhi School of Economics.
    2. Banerjee, Swapnendu & Poddar, Sougata, 2019. "‘To sell or not to sell’: Licensing versus selling by an outside innovator," Economic Modelling, Elsevier, vol. 76(C), pages 293-304.
    3. Ding, Rong & Ko, Chiu Yu, 2021. "Does licensing improve welfare with rent dissipation?," Economic Modelling, Elsevier, vol. 105(C).
    4. Yulia Dzhabarova & Stanimir Kabaivanov & Margarita Ruseva & Boyan Zlatanov, 2020. "Existence, Uniqueness and Stability of Market Equilibrium in Oligopoly Markets," Administrative Sciences, MDPI, vol. 10(3), pages 1-32, September.
    5. Sougata Poddar & Swapnendu Banerjee & Monalisa Ghosh, 2021. "Technology transfer in spatial competition when licensees are asymmetric," Manchester School, University of Manchester, vol. 89(1), pages 24-45, January.
    6. Gelves, Juan Alejandro & Heywood, John S., 2016. "How does a mixed ownership firm license a patent?," Economic Modelling, Elsevier, vol. 59(C), pages 278-284.
    7. Partha Pratim Dube, 2018. "Bertrand Game Under Cost Function," Australian Economic Papers, Wiley Blackwell, vol. 57(4), pages 489-496, December.
    8. Kabiraj, Abhishek & Kabiraj, Tarun, 2017. "Tariff induced licensing contracts, consumers’ surplus and welfare," Economic Modelling, Elsevier, vol. 60(C), pages 439-447.
    9. Kabiraj, Tarun & Chatterjee, Rittwik & Chattopadhyay, Srobonti, 2020. "Free Licensing in a Differentiated Duopoly," MPRA Paper 101984, University Library of Munich, Germany.

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    More about this item

    Keywords

    Patent sale; licensing; asymmetric firms; cost reducing innovation; auction; fixed fee; royalty; two part tariff;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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