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Per-unit versus ad-valorem royalty licensing in a Stackelberg market

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  • Antelo, Manel
  • Bru, Lluís

Abstract

We consider licensing of a non-drastic innovation by a patentholder who interacts with a potential licensee in a Stackelberg duopoly. We compare per-unit and ad-valorem royalty contracts, showing why and when each licensing deal should be observed. We find that ad-valorem royalty is preferred by a licensor that plays as the leader, but per-unit royalty is more profitable if the licensor is the follower. We also find that only innovations that do not hurt consumers are socially beneficial. Finally, licensor’s leadership or followership and innovation size determine licensing impact on the incentive to disseminate an innovation.

Suggested Citation

  • Antelo, Manel & Bru, Lluís, 2020. "Per-unit versus ad-valorem royalty licensing in a Stackelberg market," MPRA Paper 105742, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:105742
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    References listed on IDEAS

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    Cited by:

    1. Antelo, Manel & Bru, Lluís, 2022. "Licensing in a Stackelberg industry, product differentiation, and welfare," MPRA Paper 114181, University Library of Munich, Germany.
    2. Nuno Costa & João Lourenço, 2022. "Bi-Objective Optimization Problems—A Game Theory Perspective to Improve Process and Product," Sustainability, MDPI, vol. 14(22), pages 1-14, November.
    3. Masashi Umezawa, 2022. "Optimal two-part tariff licensing in a Stackelberg duopoly," Economics Bulletin, AccessEcon, vol. 42(2), pages 629-642.

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    More about this item

    Keywords

    Licensing; leader and follower; welfare;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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