Bargaining and delay in patent licensing
We consider a model of licensing of a non-drastic innovation in which the patent holder (an outside innovator) negotiates either up-front fixed fees or per-unit royal- ties with two firms producing horizontally differentiated brands and competing à la Cournot. We investigate how licensing schemes (fixed fee or per-unit royalty) and the number of licenses sold (exclusive licensing or complete technology diffusion) affect price agreements and delays in reaching an agreement. We show that the patent holder prefers to license by means of up-front fixed fees except if market competition is mild and the innovation size is small. Once there is private information about the relative bargaining power of the parties, the patent holder may prefer licensing by means of per-unit royalties even if market competition is strong. Moreover, the delay in reaching an agreement is greater whenever the patent holder chooses to negotiate up-front fixed fees instead of per-unit royalties.
|Date of creation:||01 Dec 2010|
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- Francisco Caballero-Sanz & Rafael Moner-Colonques & José J. Sempere-Monerris, 2002.
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- CABALLERO-SANZ, Francisco & MONER-COLONQUES, Rafael & SEMPERE-MONERRIS, J.J., 1994. "Optimal Licensing in a Spatial Model," CORE Discussion Papers 1994031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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).
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216.93, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Macho-Stadler, Ines & Martinez-Giralt, Xavier & David Perez-Castrillo, J., 1996. "The role of information in licensing contract design," Research Policy, Elsevier, vol. 25(1), pages 43-57, January.
- Sempere Monerris, Jose J & Vannetelbosch, Vincent J, 2001. "The Relevance of Bargaining for the Licensing of a Cost-Reducing Innovation," Bulletin of Economic Research, Wiley Blackwell, vol. 53(2), pages 101-15, April.
- Jose J. Sempere Monerris & Vincent Vannetelbosch, 2001. "The patent holder's bargaining power and the licensing of an innovation," Applied Economics Letters, Taylor & Francis Journals, vol. 8(12), pages 765-769.
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