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Patents and Licenses

Author

Listed:
  • Yair Tauman

    (Department of Economics, Stony Brook University)

  • Debrapiya Sen

    (Department of Economics, Ryerson University, Toronto, ON, Canada.)

Abstract

This article considers the problem of patent licensing in a Cournot oligopoly under a class of general demand functions. We consider two cases, the case where the innovator is an outsider and the one where it is one of the incumbent rms. The licensing policies considered are upfront fees, royalties and combinations of the two. It is shown that (i) for generic values of magnitudes of the innovation, a royalty policy is better than fee or auction provided the industry size is relatively large, (ii) under combinations of fees and royalties, provided the innovation is relatively signi cant (or the industry size is relatively large), (a) there is always an optimal policy where the innovation is licensed to practically all rms of the industry and (b) any optimal combination includes a positive royalty.

Suggested Citation

  • Yair Tauman & Debrapiya Sen, 2012. "Patents and Licenses," Department of Economics Working Papers 12-05, Stony Brook University, Department of Economics.
    • Handle: RePEc:nys:sunysb:12-05
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    File URL: http://www.stonybrook.edu/economics/research/papers/2012/licensingDeb-Yair.pdf
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    References listed on IDEAS

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    Cited by:

    1. SCHOLZ, Eva-Maria, 2014. "Licensing to vertically related markets," LIDAM Discussion Papers CORE 2014020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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