| Abstract: |
This paper compares three licensing regimes in a symmetric duopoly model
situated on a circular city à la Salop. One of the firms holds a patent
allowing to reduce the marginal production cost and decides to license its
innovation under a fixed fee or a royalty regimes or not to license. The paper
shows that fixed fee licensing is better than no licensing for a non drastic
innovation which contradicts the result found by Poddar and Sinha (2004) in a
linear model. Results also show that, for a non drastic innovation, fixed fee
licensing is better than royalty licensing and the opposite for a drastic
innovation. Finally, I show that optimal licensing regime for the patent
holding firm when innovation is not drastic is fixed fee and I show that for
this licensing regime a Nash equilibrium exists. When innovation is drastic,
patent holding firm do not license and become a monopoly. |