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Patent licensing with Bertrand competitors

Author

Listed:
  • Stefano Colombo

    () (DISCE, Università Cattolica)

  • Luigi Filippini

    () (DISCE, Università Cattolica)

Abstract

We study optimal licensing contracts in a differentiated Bertrand duopoly, and show that per-unit contracts are preferred to ad valorem contracts by the patentee, while welfare is higher under the ad valorem contract. The difference between Cournot and Bertrand case is explained in terms of quantity effect and profits effect.

Suggested Citation

  • Stefano Colombo & Luigi Filippini, 2012. "Patent licensing with Bertrand competitors," DISCE - Quaderni dell'Istituto di Teoria Economica e Metodi Quantitativi itemq1262, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  • Handle: RePEc:ctc:serie6:itemq1262
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    References listed on IDEAS

    as
    1. Morton I. Kamien & Yair Tauman, 1986. "Fees Versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 471-491.
    2. Tomomichi Mizuno & Kazuhiro Takauchi & Takeshi Iida, 2011. "Better technology may be sold for a lower fee: The ad valorem tariff and licensing contract," Discussion Papers 1109, Graduate School of Economics, Kobe University.
    3. Michael L. Katz & Carl Shapiro, 1986. "How to License Intangible Property," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 567-589.
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    7. Das Varma, Gopal, 2003. "Bidding for a process innovation under alternative modes of competition," International Journal of Industrial Organization, Elsevier, vol. 21(1), pages 15-37, January.
    8. Nisvan Erkal, 2005. "Optimal Licensing Policy in Differentiated Industries," The Economic Record, The Economic Society of Australia, vol. 81(252), pages 51-60, March.
    9. Fan, Cuihong & Jun, Byoung Heon & Wolfstetter, Elmar G., 2013. "Licensing process innovations when losersʼ messages determine royalty rates," Games and Economic Behavior, Elsevier, vol. 82(C), pages 388-402.
    10. Stefano Colombo & Luigi Filippini, 2015. "Patent Licensing with Bertrand Competitors," Manchester School, University of Manchester, pages 1-16.
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    20. Luigi Filippini, 2005. "Licensing Contract In A Stackelberg Model," Manchester School, University of Manchester, vol. 73(5), pages 582-598, September.
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    27. Sen, Debapriya, 2005. "Fee versus royalty reconsidered," Games and Economic Behavior, Elsevier, vol. 53(1), pages 141-147, October.
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    Citations

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    Cited by:

    1. Stefano Colombo & Luigi Filippini, 2015. "Patent Licensing with Bertrand Competitors," Manchester School, University of Manchester, pages 1-16.
    2. Gerard Llobet & Jorge Padilla, 2016. "The Optimal Scope of the Royalty Base in Patent Licensing," Journal of Law and Economics, University of Chicago Press, vol. 59(1), pages 45-73.
    3. John Heywood & Zheng Wang, 2015. "How to license a transport innovation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 55(2), pages 485-500, December.
    4. San Martín Lizarralde, Marta & Saracho de la Torre, Ana Isabel, 2012. "Two-part tariff licensing mechanisms," IKERLANAK Ikerlanak;2012-59, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    5. Cuihong Fan & Byoung Heon Jun & Elmar G. Wolfstetter, 2017. "Optimal Licensing of Technology in the Face of (Asymmetric) Competition," Discussion Paper Series 1705, Institute of Economic Research, Korea University.
    6. repec:kap:jeczfn:v:121:y:2017:i:3:d:10.1007_s00712-017-0528-6 is not listed on IDEAS
    7. repec:bla:jecrev:v:68:y:2017:i:1:p:115-130 is not listed on IDEAS
    8. Stefano Colombo & Luigi Filippini, 2016. "Revenue royalties," Journal of Economics, Springer, vol. 118(1), pages 47-76, May.

    More about this item

    Keywords

    Two-part contracts; patent licensing; ad valorem royalties; Bertrand;

    JEL classification:

    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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