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Revenue royalties

Author

Listed:
  • Stefano Colombo

    (Università Cattolica del Sacro Cuore, Milano)

  • Luigi Filippini

    (Università Cattolica del Sacro Cuore, Milano)

Abstract

Under the assumption of decreasing returns to scale, we compare several licensing mechanisms—per-unit royalty, an ad valorem royalty, and a revenue-royalty, and combinations with fixed fees—for an insider patentee. In the case of a non-drastic innovation, the patentee maximizes its profits by offering, respectively, an ad valorem royalty, a revenue-royalty and a two-part per-unit royalty, if the cost function is scarcely or highly convex, moderately-low convex, and moderately-high convex. In the case of a drastic innovation, the patentee always offers an ad valorem royalty contract.

Suggested Citation

  • Stefano Colombo & Luigi Filippini, 2016. "Revenue royalties," Journal of Economics, Springer, vol. 118(1), pages 47-76, May.
    • Handle: RePEc:kap:jeczfn:v:118:y:2016:i:1:d:10.1007_s00712-015-0459-z
    DOI: 10.1007/s00712-015-0459-z
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Manel Antelo & Lluís Bru, 2022. "Per-unit versus ad-valorem royalty licensing in a Stackelberg market," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 49(1), pages 95-109, March.
    2. Yingyi Tsai & Arijit Mukherjee, 2017. "Domestic patenting systems and foreign licensing choices," Journal of Economics, Springer, vol. 121(2), pages 173-191, June.
    3. John S. Heywood & Lu Xu & Guangliang Ye, 2019. "How does a public innovator license a foreign rival?," Australian Economic Papers, Wiley Blackwell, vol. 58(1), pages 78-95, March.
    4. Chen, Jingxian & Liang, Liang & Yao, Dong-qing, 2017. "An analysis of intellectual property licensing strategy under duopoly competition: Component or product-based?," International Journal of Production Economics, Elsevier, vol. 193(C), pages 502-513.

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    More about this item

    Keywords

    Patent licensing; Convex cost function; Royalties on revenues; Royalties on profits; Per-unit royalties;
    All these keywords.

    JEL classification:

    • D45 - Microeconomics - - Market Structure, Pricing, and Design - - - Rationing; Licensing

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