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Decentralized licensing of complementary patents: Comparing the royalty, fixed-fee and two-part tariff regimes

  • Meniere, Yann
  • Parlane, Sarah

This paper explores the decentralized licensing of complementary patents reading on a technology standard. We develop a model in which manufacturers must buy licenses from different patent owners in order to enter the market for differentiated standard-compliant products. We consider three different types of licensing, namely, the fixed-fee, per-unit royalty and two-part tariff regimes, and compare their performances in terms of licensing revenue, price, product variety and welfare. We show that each regime entails different types of coordination failures. We establish that each of them may maximize the licensing revenue depending on the number of licensors, number of potential entrants and product differentiation.

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Article provided by Elsevier in its journal Information Economics and Policy.

Volume (Year): 22 (2010)
Issue (Month): 2 (May)
Pages: 178-191

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Handle: RePEc:eee:iepoli:v:22:y:2010:i:2:p:178-191
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505549

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  1. Chiao, Benjamin & Lerner, Josh & Tirole, Jean, 2006. "The Rules of Standard Setting Organizations: an Empirical Analysis," IDEI Working Papers 388, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Sougata Poddar & Uday Bhanu Sinha, 2004. "On Patent Licensing in Spatial Competition," The Economic Record, The Economic Society of Australia, vol. 80(249), pages 208-218, 06.
  3. Reiko Aoki; Sadao Nagaoka, 2004. "The Consortium Standard and Patent Pools," Econometric Society 2004 Far Eastern Meetings 788, Econometric Society.
  4. Sen, Debapriya, 2005. "Fee versus royalty reconsidered," Games and Economic Behavior, Elsevier, vol. 53(1), pages 141-147, October.
  5. Kamien, Morton I., 1992. "Patent licensing," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 11, pages 331-354 Elsevier.
  6. Can Erutku & Yves Richelle, 2007. "Optimal Licensing Contracts and the Value of a Patent," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(2), pages 407-436, 06.
  7. Kamien, Morton I & Tauman, Yair, 1986. "Fees versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, MIT Press, vol. 101(3), pages 471-91, August.
  8. CABALLERO-SANZ, Francisco & MONER-COLONQUES, Rafael & SEMPERE-MONERRIS, José J., . "Optimal licensing in a spatial model," CORE Discussion Papers RP -1588, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. Xavier Vives, 2001. "Oligopoly Pricing: Old Ideas and New Tools," MIT Press Books, The MIT Press, edition 1, volume 1, number 026272040x, June.
  10. Kamien, Morton I. & Oren, Shmuel S. & Tauman, Yair, 1992. "Optimal licensing of cost-reducing innovation," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 483-508.
  11. Nisvan Erkal, 2005. "Optimal Licensing Policy in Differentiated Industries," The Economic Record, The Economic Society of Australia, vol. 81(252), pages 51-60, 03.
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