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Ming-Chung Chang
''Insider patent holder licensing in an oligopoly market with different cost structures: Fixed-fee, royalty, and auction''
( 2010, Vol. 30 No.1 )
The issue of the optimal licensing contract in firms having different cost structures is studied when the innovator is a producing patent holder who has three alternative licensing strategies, namely, the fixed-fee, royalty rate, and auction strategies. We conclude that the auction licensing strategy is not the best strategy when the innovator is a producing patent holder. This finding differs from that of Kabiraj (2004) where the auction licensing method is the optimal licensing strategy when the innovator is a non-producing patent holder. However, when we only compare two of the licensing methods, namely, the fixed-fee licensing method and the royalty licensing method, we conclude that if the inside innovator licenses to only some of the firms, then the royalty licensing method will be the best strategy. This result is different from that of Fosfuri and Roca (2004), who concluded that if only some of the licensees obtain a licensing contract, then the fixed-fee licensing method will be the best choice for a producing patent holder.
Keywords: Licensing strategy, Cost structure, Auction
JEL: O3 - Technological Change; Research and Development: General
C5 - Econometric Modeling: General
Manuscript Received : Mar 09 2009 Manuscript Accepted : Jan 06 2010

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