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Per unit and ad valorem royalties in a patent licensing game

Author

Listed:
  • Marta Montinaro

    (University of Salento)

  • Rupayan Pal

    (Indira Gandhi Institute of Development Research)

  • Marcella Scrimitore

    (University of Salento)

Abstract

In a context of product innovation, we study two-part tariff licensing between a patentee and a potential rival which compete in a differentiated product market characterized by network externalities. The latter are shown to crucially affect the relative profitability of Cournot vs. Bertrand when a per unit royalty is applied. By contrast, we find that Cournot yields higher profits than Bertrand under ad valorem royalties, regardless of the strength of network effects.

Suggested Citation

  • Marta Montinaro & Rupayan Pal & Marcella Scrimitore, 2020. "Per unit and ad valorem royalties in a patent licensing game," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2020-014, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2020-014
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    References listed on IDEAS

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    More about this item

    Keywords

    Licensing; Product Innovation; Bertrand; Cournot; Network Effects;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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