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Licensing Schemes in Endogenous Entry

Author

Listed:
  • Ryoko Oki

    (Graduate School of Economics, the University of Tokyo)

Abstract

This paper examines the optimal licensing scheme when the number of licensees is determined endogenously. We demonstrate that a license holder obtains monopoly profit even if the license holder uses only a fixed fee as long as the marginal cost is constant. Furthermore, we show that under free entry of licensees, a license holder can obtain monopoly profit with any combination of a positive fixed fee and a unit royalty that satisfies a certain condition. Even if the fixed fee is regulated to be a certain level, a license holder can achieve monopoly profit by means of a unit royalty. This result is in contrast with that of a case where the number of licensees is exogenously determined.

Suggested Citation

  • Ryoko Oki, 2010. "Licensing Schemes in Endogenous Entry," Economics Bulletin, AccessEcon, vol. 30(4), pages 3237-3247.
    • Handle: RePEc:ebl:ecbull:eb-10-00543
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2010/Volume30/EB-10-V30-I4-P298.pdf
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    References listed on IDEAS

    as
    1. de Meza, David, 1986. "Immiserising invention : The private and social returns to R&D under oligopoly," International Journal of Industrial Organization, Elsevier, vol. 4(4), pages 409-417, December.
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    More about this item

    Keywords

    license; endogenous entry;

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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