Thomas Giebe (Institute of Economic Theory I, Humboldt University at Berlin, Spandauer Str. 1, 10099 Berlin, Germany. thomas.giebe@wiwi.hu-berlin.de) Elmar Wolfstetter (Institute of Economic Theory I, Humboldt University at Berlin, Spandauer Str. 1, 10099 Berlin, Germany. elmar.wolfstetter@rz.hu–berlin.de)
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This paper revisits the standard analysis of licensing a cost reducing innovation by an outside innovator to a Cournot oligopoly. We propose a new mechanism that combines elements of a license auction with royalty licensing by granting the losers of the auction the option to sign a royalty contract. The optimal new mechanism eliminates the losses from exclusionary licensing without reducing bidders’ surplus; therefore, it is more profitable than both standard license auctions and pure royalty licensing. We also take into account that the number of licenses must be an integer, which is typically ignored in the literature.
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Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number
96.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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.
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