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Per unit and ad valorem royalties in a patent licensing game

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  • Montinaro, Marta
  • Scrimitore, Marcella

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

  • Montinaro, Marta & Scrimitore, Marcella, 2019. "Per unit and ad valorem royalties in a patent licensing game," MPRA Paper 96642, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:96642
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    File URL: https://mpra.ub.uni-muenchen.de/96642/1/MPRA_paper_96642.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    licensing; product innovation; bertrand vs. cournot; network effects;

    JEL classification:

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

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