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The Role of Fixed Fee and Royalty in Patent Licensing

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  • Sougata Poddar

    ()
    (National University of Singapore)

  • Uday Bhanu Sinha

    ()
    (Indian Statistical Institute)

Abstract

We consider a monopolistic screening model of patent licensing. There is one patentee and one licensee and the patentee wishes to sell a patent of cost reducing technology to the licensee. The patentee is an outsider and the licensee is the only firm in the product market. The licensee possesses private information about the market demand which is unknown to the patentee except for some prior belief about it. In this scenario, we find the linear optimal licensing contract.

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Bibliographic Info

Paper provided by National University of Singapore, Department of Economics in its series Departmental Working Papers with number wp0211.

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Date of creation: 2002
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Handle: RePEc:nus:nusewp:wp0211

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Keywords: licensing; fixed fee; royalty; adverse selection;

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References

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  1. Nancy T. Gallini & Brian D. Wright, 1990. "Technology Transfer under Asymmetric Information," RAND Journal of Economics, The RAND Corporation, vol. 21(1), pages 147-160, Spring.
  2. Macho, I. & Martinez-Giralt, X. & Perez-Castrillo, D., 1993. "The Role of Information in Licensing Contract Design," UFAE and IAE Working Papers 216.93, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  3. Choi, Jay Pil, 1996. "Technology Transfer with Moral Hazard," Economics Series 22, Institute for Advanced Studies.
  4. Bousquet, Alain & Cremer, Helmuth & Ivaldi, Marc & Wolkowicz, Michel, 1998. "Risk sharing in licensing," International Journal of Industrial Organization, Elsevier, vol. 16(5), pages 535-554, September.
  5. Beggs, A. W., 1992. "The licensing of patents under asymmetric information," International Journal of Industrial Organization, Elsevier, vol. 10(2), pages 171-191, June.
  6. Marie Thursby & Richard Jensen, 2001. "Proofs and Prototypes for Sale: The Licensing of University Inventions," American Economic Review, American Economic Association, vol. 91(1), pages 240-259, March.
  7. Kamien, Morton I & Tauman, Yair, 1986. "Fees versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 471-91, August.
  8. Kamien, Morton I., 1992. "Patent licensing," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 11, pages 331-354 Elsevier.
  9. Katz, Michael L & Shapiro, Carl, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 567-89, August.
  10. Kamien, Morton I. & Oren, Shmuel S. & Tauman, Yair, 1992. "Optimal licensing of cost-reducing innovation," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 483-508.
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Cited by:
  1. repec:hal:wpaper:halshs-00595493 is not listed on IDEAS
  2. Debapriya Sen & Yair Tauman, 2002. "General licensing schemes for a cost-reducing innovation," Department of Economics Working Papers 02-03, Stony Brook University, Department of Economics.
  3. Arijit Mukherjee, 2002. "Licensing under Asymmetric information," Industrial Organization 0211007, EconWPA.
  4. Arijit Mukherjee, . "Technology licensing under convex costs," Discussion Papers 10/05, University of Nottingham, School of Economics.
  5. Sougata Poddar & Uday Bhanu Sinha, 2004. "On Patent Licensing in Spatial Competition," The Economic Record, The Economic Society of Australia, vol. 80(249), pages 208-218, 06.
  6. Sen, Debapriya, 2005. "Fee versus royalty reconsidered," Games and Economic Behavior, Elsevier, vol. 53(1), pages 141-147, October.
  7. Arijit Mukherjee, . "Licensing a new product: Fee vs. royalty licensing with unionized labor market," Discussion Papers 07/03, University of Nottingham, School of Economics.
  8. Manel Antelo, 2010. "Screening vs. signaling in technology licensing," Economic Working Papers at Centro de Estudios Andaluces E2010/05, Centro de Estudios Andaluces.
  9. Xue, Minggao & Su, Lili, 2011. "Licensing to a durable-good duopoly in patent litigation," Economic Modelling, Elsevier, vol. 28(3), pages 1186-1194, May.
  10. Bagchi, Aniruddha & Mukherjee, Arijit, 2014. "Technology licensing in a differentiated oligopoly," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 455-465.

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