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Fixed-Fee Licensing of Innovations and Collusion


  • Lin, Ping


Unlike other types of licensing agreements, such as those with output restrictions, market division clauses, or output royalties, licensing contracts with only a fixed-fee have been perceived as having no anticompetitive consequences. This paper illustrates that fixed-fee licensing may facilitate collusion by enhancing the licensee's ability to credibly punish deviations from the collusive outcome on the part of the licenser. Antitrust implications of the result and potential ways of detecting collusion-motivated licenses are discussed. Copyright 1996 by Blackwell Publishing Ltd.

Suggested Citation

  • Lin, Ping, 1996. "Fixed-Fee Licensing of Innovations and Collusion," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 443-449, December.
  • Handle: RePEc:bla:jindec:v:44:y:1996:i:4:p:443-49

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    References listed on IDEAS

    1. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, January.
    2. Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-366, May.
    3. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-1150, September.
    4. Bester, Helmut & de Palma, Andre & Leininger, Wolfgang & Thomas, Jonathan & von Thadden, Ernst-Ludwig, 1996. "A Noncooperative Analysis of Hotelling's Location Game," Games and Economic Behavior, Elsevier, vol. 12(2), pages 165-186, February.
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