| By: |
Antelo, Manel;
Bru, Lluís |
| Abstract: |
We consider a non-producer patentholder with a cost-reducing innovation that
can be used in a homogeneous duopolistic industry. To profit from the
innovation, the patentholder can decide to sell it, or license it, and if the
latter, the number of licences to grant as well as the corresponding
contractual terms. We show that the size (value or quality) of innovation is
crucial for that decision. The patentholder prefers to sell a small-sized
innovation, in which case the buyer further licenses it to the competitor by
means of a pure ad-valorem royalty contract. However, if the innovation is
moderate or large, the patentholder retains ownership and licenses it to both
firms through 2PT contracts involving per-unit royalties. Sale is shown to be
welfare superior to licensing for both consumers and firms. |
| Keywords: |
Cost-reducing innovation, sale, licensing, per-unit royalty, ad-valorem royalty, welfare |
| JEL: |
L13 L24 |
| Date: |
2024–01 |
| URL: |
https://d.repec.org/n?u=RePEc:pra:mprapa:122731 |