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Licensing to a durable-good monopoly

  • Li, Changying
  • Geng, Xiaoyan

This paper incorporates a durable-good monopoly model and re-examines the argument on licensing contracts. It shows that, from the perspective of the non-producing patent holder, the optimal licensing contract depends on the nature and the degree of the innovations. Specifically, for small cost-reducing or quality-improving innovations, charging a royalty is optimal. For large cost-reducing or quality-improving innovations, licensing by means of a fee and a royalty is superior to using either alone. However, for the case of horizontal product innovations, using a fee contract is optimal.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 25 (2008)
Issue (Month): 5 (September)
Pages: 876-884

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Handle: RePEc:eee:ecmode:v:25:y:2008:i:5:p:876-884
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