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On the Optimality of Patent Licensing with Maximum Production Volume

Author

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  • Marco Alderighi

    (Università della Valle d'Aosta)

Abstract

This paper compares alternative licensing schemes of a patentor, that is, at the same time, a producer within an industry. The licensing scheme can assume the form of a royalty per unit of output, a fixed fee, or a fixed fee with maximum authorized production. We show that, when the innovation is non-drastic, in a duopolistic Cournot competition, the third method dominates the others. As the patentor has strong incentives to limit the output of the opponent, this practice must be carefully monitored by the antitrust authority.

Suggested Citation

  • Marco Alderighi, 2008. "On the Optimality of Patent Licensing with Maximum Production Volume," Economics Bulletin, AccessEcon, vol. 12(5), pages 1-7.
    • Handle: RePEc:ebl:ecbull:eb-07l10035
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    References listed on IDEAS

    as
    1. Morton I. Kamien & Yair Tauman, 1986. "Fees Versus Royalties and the Private Value of a Patent," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(3), pages 471-491.
    2. Christian Bessy & Eric Brousseau & Camille Chaserant & Régis Coeurderoy, 2006. "“The Diversity of Technology Licensing Agreements and their Causes“," Post-Print hal-00178705, HAL.
    3. Kamien,Morton I. & Schwartz,Nancy L., 1982. "Market Structure and Innovation," Cambridge Books, Cambridge University Press, number 9780521293853, December.
    4. Rockett, Katharine, 1990. "The quality of licensed technology," International Journal of Industrial Organization, Elsevier, vol. 8(4), pages 559-574, December.
    5. Morton I. Kamien & Yair Tauman, 2002. "Patent Licensing: The Inside Story," Manchester School, University of Manchester, vol. 70(1), pages 7-15, January.
    6. Fershtman, Chaim & Kamien, Morton I., 1992. "Cross licensing of complementary technologies," International Journal of Industrial Organization, Elsevier, vol. 10(3), pages 329-348, September.
    7. Kamien, Morton I. & Oren, Shmuel S. & Tauman, Yair, 1992. "Optimal licensing of cost-reducing innovation," Journal of Mathematical Economics, Elsevier, vol. 21(5), pages 483-508.
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    Cited by:

    1. Stefano Colombo & Luigi Filippini & Debapriya Sen, 2023. "Patent Licensing and Capacity in a Cournot Model," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 62(1), pages 45-62, February.
    2. Colombo, Stefano & Filippini, Luigi & Sen, Debapriya, 2020. "Licensing with capacity constraint," MPRA Paper 102653, University Library of Munich, Germany.

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    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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