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Patent Licensing with Bertrand Competitors

Listed author(s):
  • Stefano Colombo
  • Luigi Filippini

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.

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File URL: http://hdl.handle.net/10.1111/manc.12050
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Article provided by University of Manchester in its journal The Manchester School.

Volume (Year): 83 (2015)
Issue (Month): 1 (01)
Pages: 1-16

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Handle: RePEc:bla:manchs:v:83:y:2015:i:1:p:1-16
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