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Decentralized of licensing of complementary patents: comparing royalty, fixed fee and two part tariff

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  • Ménière, Yann
  • Parlane, Sarah

Abstract

This paper analyzes how an inventor should fix the licensing terms to license a standard in complying with a non-discrimination requirement. Using a model incorporating imperfect competition between a finite number of users and product differentiation, we compare three different regimes: fixed fee (also known as royalty free), per unit royalty and two-part tariff. We highlight the different effects of each design on prices and number of varieties. We identify which one dominates with respect to the licensor's profit and total welfare. Finally we extend our model to a setting where the standard is protected by several licenses owned by non-cooperating owners.

Suggested Citation

  • Ménière, Yann & Parlane, Sarah, 2008. "Decentralized of licensing of complementary patents: comparing royalty, fixed fee and two part tariff," PIE/CIS Discussion Paper 383, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:piecis:383
    Note: June 13, 2008
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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/15851/1/pie_dp383.pdf
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    References listed on IDEAS

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    1. Francisco Caballero-Sanz & Rafael Moner-Colonques & José J. Sempere-Monerris, 2002. "Optimal Licensing in a Spatial Model," Annals of Economics and Statistics, GENES, issue 66, pages 257-279.
    2. repec:adr:anecst:y:2002:i:66:p:11 is not listed on IDEAS
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