Optimal Licensing Strategy: Royalty or Fixed Fee?
Licensing a cost-reducing innovation through a royalty has been shown to be superior to licensing by means of a fixed fee for an incumbent licensor. This note shows that this result relies crucially on the assumption that the incumbent licensor can sell its cost-reducing inno-vation to all industry players. If, for any reason, only some competitors could be reached through a licensing contract, then a fixed fee might be optimally chosen.
Volume (Year): 3 (2004)
Issue (Month): 1 (April)
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- Arora, Ashish & Fosfuri, Andrea, 1999.
"Licensing the Market for Technology,"
CEPR Discussion Papers
2284, C.E.P.R. Discussion Papers.
- Wang, X. Henry, 1998. "Fee versus royalty licensing in a Cournot duopoly model," Economics Letters, Elsevier, vol. 60(1), pages 55-62, July.
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