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Masashi Umezawa
''Optimal two-part tariff licensing in a Stackelberg duopoly''
( 2022, Vol. 42 No.2 )
This article studies the patent licensing of a cost-reducing innovation by an incumbent innovator in a Stackelberg duopoly. We show that two-part ad valorem profit royalty licensing, which is verified to be equal to pure ad valorem profit royalties, is superior to both two-part per-unit royalty and two-part ad valorem revenue royalty licensing offers for the patentee if the innovation is non-drastic and relatively small. Then, both consumer and social welfare are lower under ad valorem profit royalty licensing than under the other two-part royalty licensing offer, as well as under no licensing.
Keywords: Incumbent innovator, Licensing, Royalty, Stackelberg duopoly, Two-part tariff
JEL: D4 - Market Structure and Pricing: General
L1 - Market Structure, Firm Strategy, and Market Performance: General
Manuscript Received : Jul 23 2021 Manuscript Accepted : Jun 30 2022

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