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| Masashi Umezawa |
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| ''Optimal two-part tariff licensing in a Stackelberg duopoly'' |
| ( 2022, Vol. 42 No.2 ) |
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| 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. |
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| 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 |
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| Manuscript Received : Jul 23 2021 | | Manuscript Accepted : Jun 30 2022 |
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