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Optimal Value Of A Patent In An Asymmetric Cournot Duopoly Market

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  • Uday Bhanu Sinha

    (Departments of Economics, Delhi School of Economics, University of Delhi, India)

Abstract

We consider a mechanism for optimizing the value of a patent owned by an independent patent holder who is not a producer in the market. We consider two kinds of cost reducing innovations: “common innovation” and “new technology innovation” in a homogeneous good Cournot market with ex-ante asymmetric costs of production. We show that the value of the patent is maximized when the patent holder sells the patent to the efficient firm at a fixed payment who would further license the innovation to its rival. This patent sale dominates all other licensing mechanisms for both kinds of innovations.

Suggested Citation

  • Uday Bhanu Sinha, 2015. "Optimal Value Of A Patent In An Asymmetric Cournot Duopoly Market," Working papers 245, Centre for Development Economics, Delhi School of Economics.
  • Handle: RePEc:cde:cdewps:245
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    References listed on IDEAS

    as
    1. Fauli-Oller, Ramon & Sandonis, Joel, 2002. "Welfare reducing licensing," Games and Economic Behavior, Elsevier, vol. 41(2), pages 192-205, November.
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    Citations

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    Cited by:

    1. Gelves, Juan Alejandro & Heywood, John S., 2016. "How does a mixed ownership firm license a patent?," Economic Modelling, Elsevier, vol. 59(C), pages 278-284.
    2. Kabiraj, Abhishek & Kabiraj, Tarun, 2017. "Tariff induced licensing contracts, consumers’ surplus and welfare," Economic Modelling, Elsevier, vol. 60(C), pages 439-447.
    3. Banerjee, Swapnendu & Poddar, Sougata, 2017. "‘To sell or not to sell’: Licensing versus Selling by an outside innovator," MPRA Paper 80432, University Library of Munich, Germany.

    More about this item

    Keywords

    Patent sale; licensing; asymmetric firms; cost reducing innovation; auction; fixed fee; royalty; two part tariff;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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