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Licensing a new product: Fee vs. royalty licensing with unionized labor market

  • Mukherjee, Arijit

In an economy with unionized labor market, we show that the payoff of an outside innovator may be higher under royalty licensing than under fixed-fee licensing and auction, if bargaining power of the labor union is sufficiently high. This result holds for both decentralized and centralized bargaining. It follows from our analysis that a combination of fixed-fee and output royalty can be preferable to the innovator compared to both royalty only licensing and auction (or fixed-fee licensing). We discuss the implications of positive opportunity costs of the licensees.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 17 (2010)
Issue (Month): 4 (August)
Pages: 735-742

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Handle: RePEc:eee:labeco:v:17:y:2010:i:4:p:735-742
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