Bargaining in Patent Licensing with Inefficient Outcomes
A monopoly incumbent faces an outside innovator who holds a new technology which has no industrial value to the monopolist but allows a protable entry. The monopolistis willing to pay for the IP of the technology more than any entrant, in an attempt to limit entry. Still, the innovator may sell a number of licenses before bargaining with the monopolist, even though this will reduce the bargaining cake. The sale of licenses will credibly increase the innovator's threat on the monopolist, as it increases the number of licenses the innovator will sell in case the bargaining fails.
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