Patent Licensing with <scp>B</scp>ertrand Competitors

Colombo, Stefano; Filippini, Luigi

doi:10.1111/manc.12050

Cited by 30 publications

(27 citation statements)

References 30 publications

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“…Colombo and Filippini () show that under Bertrand competition when goods are substitutes an internal patentee will prefer to license the innovation to his rival using per‐unit royalties instead of ad valorem royalties. In that context the ad valorem royalty only affects the strategic behavior of the patentee who behaves less aggressively than without royalty.…”

Section: Patent Licensing Mechanismsmentioning

confidence: 99%

Optimal Two‐part Tariff Licensing Mechanisms

Martín

Saracho

2014

The Manchester School

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This paper studies the optimal two‐part tariff licensing contract for an internal patentee in a differentiated Cournot duopoly. We find that the type of the royalty payment, whether ad valorem or per‐unit, that it is optimal for the patentee depends on the kind of goods produced in the industry, more precisely on whether they are substitutes or complements and on the degree of product differentiation. We also find that licensing always increases social welfare, although it may hurt consumers.

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Section: Patent Licensing Mechanismsmentioning

confidence: 99%

Optimal Two‐part Tariff Licensing Mechanisms

Martín

Saracho

2014

The Manchester School

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“…He showed that the two forms of two-part tariffs are equivalent to each other regarding both the profitability and the welfare implications. Other works on a two-part ad valorem royalty mechanism include Heywood et al (2014), Colombo and Filippini (2015), and San Martín and Saracho (2015). While these papers assume constant returns to scale, Colombo and Filippini (2016) compared several licensing mechanisms -ad valorem royalty, per-unit royalty and revenue-royalty -under the assumption of decreasing returns to scale in a Cournot duopoly.…”

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confidence: 99%

Ad Valorem Versus Per‐unit Royalty Licensing in a Cournot Duopoly Model

Hsu

Liu

Wang

et al. 2019

The Manchester School

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Ad valorem royalty licensing is implemented when the licensor (i.e., patent‐holding firm) obtains ownership shares in the licensee as payment once the new technology is transferred. In a Cournot duopoly model, we compare two licensing forms between competitors of different productivity, ad valorem and per‐unit royalty licensing. This paper finds that ad valorem royalty licensing is superior to per‐unit royalty licensing for the patent‐holding firm when the cost‐reducing innovation is non‐drastic. The reason for this result is that cross ownership reduces output market competition and thus the patent‐holding firm enjoys better profit margins by strategically setting the share ratio. Furthermore, we show that the relieved competition under ad valorem royalty licensing pulls down the industry output, and thus hurts consumer surplus and social welfare in comparison to per‐unit royalty licensing.

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“…Other alternative forms of royalty licensing include ad valorem royalty where a licensee pays a fraction of its revenue to the innovator. In a recent paper Colombo and Filippini (2015) study combinations of fees and ad valorem royalties in a differentiated Bertrand duopoly and find that ad valorem royalties can lead to higher welfare compared to unit royalties.…”

Section: Fr Policies: Some General Resultsmentioning

confidence: 99%

Patent licensing in a Cournot oligopoly: General results

Sen

Tauman

2018

Mathematical Social Sciences

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This paper presents a comprehensive analysis of patent licensing in a Cournot oligopoly with general demand and looks at both outside and incumbent innovators. The licensing policies considered are upfront fees, unit royalties and combinations of fees and royalties (FR policies). It is shown that (i) royalties unambiguously ensure full diffusion of the innovation while diffusion is limited under upfront fees, (ii) the Cournot price is higher under royalties compared to upfront fees and the price could even exceed the post-innovation monopoly price, (iii) for generic values of magnitudes of the innovation, when the industry size is relatively large, royalties are superior to upfront fees for the innovator and (iv) for any m, there is always a non empty subset of m-drastic innovations such that for relatively large industry sizes, upfront fee policy results in higher consumer surplus as well as welfare compared to both royalty and FR policies.

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Patent Licensing with Bertrand Competitors

Cited by 30 publications

References 30 publications

Optimal Two‐part Tariff Licensing Mechanisms

Optimal Two‐part Tariff Licensing Mechanisms

Ad Valorem Versus Per‐unit Royalty Licensing in a Cournot Duopoly Model

Patent licensing in a Cournot oligopoly: General results

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