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Licensing a new product with non-linear contracts

Author

Listed:
  • Can Erutku
  • Yves Richelle

Abstract

This paper looks at a situation where a licensor owns a patent on a technology that allows the production of a new good. The licensor seeks to license its innovation to a set of producers that differ according to their marginal cost of producing an existing good. We show that the licensor is able to obtain the profit a monopolist would achieve by producing the new good. The equilibrium licensing contract specifies both a fixed fee and a royalty scheme based on the production of a licensee.

Suggested Citation

  • Can Erutku & Yves Richelle, 2006. "Licensing a new product with non-linear contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 932-947, August.
  • Handle: RePEc:cje:issued:v:39:y:2006:i:3:p:932-947
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    Citations

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    Cited by:

    1. Rey, Patrick & Salant, David, 2012. "Abuse of dominance and licensing of intellectual property," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 518-527.
    2. Zhang, Huaige & Wang, Xuejun & Qing, Ping & Hong, Xianpei, 2016. "Optimal licensing of uncertain patents in a differentiated Stackelberg duopolistic competition market," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 215-229.
    3. Kishimoto, Shin & Watanabe, Naoki & Muto, Shigeo, 2011. "Bargaining outcomes in patent licensing: Asymptotic results in a general Cournot market," Mathematical Social Sciences, Elsevier, vol. 61(2), pages 114-123, March.

    More about this item

    JEL classification:

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

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