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Patent Licensing with Bertrand Competitors

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  • Stefano Colombo
  • Luigi Filippini

Abstract

type="main"> This paper analyses an optimal two-part licensing scheme based on ad valorem royalties within a differentiated Bertrand duopoly where the innovator is also the downstream producer, and compares it with the optimal two-part per-unit royalty mechanism. After showing that the optimal two-part ad valorem licensing scheme reduces to a pure ad valorem royalty scheme, we show that per-unit contracts are typically preferred to ad valorem contracts by the patentee, as, under price competition, the per-unit royalty has a stronger strategic effect than the ad valorem royalty. In contrast, welfare is higher under the ad valorem contract than under the per-unit mechanism.

Suggested Citation

  • Stefano Colombo & Luigi Filippini, 2015. "Patent Licensing with Bertrand Competitors," Manchester School, University of Manchester, vol. 83(1), pages 1-16, January.
  • Handle: RePEc:bla:manchs:v:83:y:2015:i:1:p:1-16
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    File URL: http://hdl.handle.net/10.1111/manc.12050
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    Citations

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    Cited by:

    1. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, October.
    2. John Heywood & Zheng Wang, 2015. "How to license a transport innovation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(2), pages 485-500, December.
    3. Gerard Llobet & Jorge Padilla, 2016. "The Optimal Scope of the Royalty Base in Patent Licensing," Journal of Law and Economics, University of Chicago Press, vol. 59(1), pages 45-73.
    4. Stefano Colombo & Luigi Filippini, 2015. "Patent Licensing with Bertrand Competitors," Manchester School, University of Manchester, vol. 83(1), pages 1-16, January.
    5. repec:bla:jecrev:v:68:y:2017:i:1:p:115-130 is not listed on IDEAS
    6. Stefano Colombo & Luigi Filippini, 2016. "Revenue royalties," Journal of Economics, Springer, vol. 118(1), pages 47-76, May.
    7. Cuihong Fan & Byoung Heon Jun & Elmar G. Wolfstetter, 2017. "Optimal Licensing of Technology in the Face of (Asymmetric) Competition," Discussion Paper Series 1705, Institute of Economic Research, Korea University.
    8. repec:eee:ecmode:v:68:y:2018:i:c:p:117-126 is not listed on IDEAS
    9. San Martín Lizarralde, Marta & Saracho de la Torre, Ana Isabel, 2012. "Two-part tariff licensing mechanisms," IKERLANAK Ikerlanak;2012-59, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    10. repec:kap:jeczfn:v:121:y:2017:i:3:d:10.1007_s00712-017-0528-6 is not listed on IDEAS
    11. Marta San Martín & Ana I. Saracho, 2015. "Optimal Two-part Tariff Licensing Mechanisms," Manchester School, University of Manchester, vol. 83(3), pages 288-306, June.
    12. Stefano Colombo, 2015. "Licensing Under Bertrand Competition Revisited," Australian Economic Papers, Wiley Blackwell, vol. 54(1), pages 38-42, March.

    More about this item

    JEL classification:

    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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