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Patent Licensing and Capacity in a Cournot Model

Author

Listed:
  • Stefano Colombo

    (Università Cattolica del Sacro Cuore)

  • Luigi Filippini

    (Università Cattolica del Sacro Cuore)

  • Debapriya Sen

    (Ryerson University)

Abstract

We consider the problem of patent licensing in a Cournot duopoly in which the innovator (patentee) is one of the firms and it is capacity constrained. We show that when the patentee can produce a relatively small (relatively large) quantity, it prefers licensing by means of a fixed fee (unit royalty). When the patentee can set two-part tariffs in the form of combinations of fixed fees and unit royalties, it charges a positive fixed fee if and only if it is limited to producing a relatively small quantity. We also show that with combinations of fixed fees and royalties, the royalty rate is lower than is true for the standard case.

Suggested Citation

  • 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.
    • Handle: RePEc:kap:revind:v:62:y:2023:i:1:d:10.1007_s11151-022-09886-7
    DOI: 10.1007/s11151-022-09886-7
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    References listed on IDEAS

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    2. Stefano Colombo & Siyu Ma & Debapriya Sen & Yair Tauman, 2021. "Equivalence between fixed fee and ad valorem profit royalty," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 23(5), pages 1052-1073, October.
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    Citations

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    Cited by:

    1. Luca Sandrini, 2024. "Price Versus Market Share with Royalty Licensing: Incomplete Adoption of a Superior Technology with Heterogeneous Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(2), pages 243-265, March.
    2. Siyu Ma & Debapriya Sen & Yair Tauman, 2024. "Optimal patent licensing: from three to two part tariffs," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(4), pages 1233-1273, December.
    3. Sun, Chia-Hung, 2023. "Timing of technology adoption in the presence of patent licensing," Economic Modelling, Elsevier, vol. 127(C).

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    More about this item

    Keywords

    Patent licensing; Cournot duopoly; Capacity constraint;
    All these keywords.

    JEL classification:

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

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