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Bargaining in Patent Licensing with Inefficient Outcomes

Author

Listed:
  • Yair Tauman
  • Yoram Weiss
  • Chang Zhao

Abstract

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.

Suggested Citation

  • Yair Tauman & Yoram Weiss & Chang Zhao, 2017. "Bargaining in Patent Licensing with Inefficient Outcomes," Department of Economics Working Papers 17-04, Stony Brook University, Department of Economics.
    • Handle: RePEc:nys:sunysb:17-04
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    File URL: http://www.stonybrook.edu/commcms/economics/research/papers/2017/Tauman_Weiss_Zhao2017.pdf
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    References listed on IDEAS

    as
    1. Yossef Spiegel, 1996. "The Role of Debt in Procurement Contracts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(3), pages 379-407, September.
    2. Heidrun C. Hoppe & Philippe Jehiel & Benny Moldovanu, 2006. "License Auctions and Market Structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(2), pages 371-396, June.
    3. Williamson, Oliver E, 1979. "Transaction-Cost Economics: The Governance of Contractural Relations," Journal of Law and Economics, University of Chicago Press, vol. 22(2), pages 233-261, October.
    4. Gilbert, Richard J & Newbery, David M G, 1982. "Preemptive Patenting and the Persistence of Monopoly," American Economic Review, American Economic Association, vol. 72(3), pages 514-526, June.
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    Cited by:

    1. Tauman, Yair & Zhao, Chang, 2018. "Patent licensing, entry and the incentive to innovate," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 229-276.
    2. Bruno D. Badia, 2019. "Patent Licensing and Technological Catch-Up in a Heterogeneous Duopoly," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 55(2), pages 287-300, September.

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