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Patent Licensing and Double Marginalization in Vertically-related Markets
| Content Provider | CiteSeerX |
|---|---|
| Author | Din, Hong-Ren Kao, Kuo-Feng Liang, Wen-Jung |
| Abstract | This paper develops a three-stage model in which the input price is expressed by a combination of its monopoly input price and marginal cost. The focus of this paper is on the role of the upstream firm in terms of the degree of its monopoly power in the choice of the out-sider patentee’s optimal licensing contract, as the outsider patentee licenses its innovation to the upstream firm. The paper shows that the outsider patentee prefers royalty (fixed-fee) licensing to fixed-fee (royalty) licensing when the degree of the upstream firm’s monopoly power is small (large) regardless of the innovation size. This pa-per shows that a rise in the degree of double-marginalization may improve the social welfare through the outsider patentee’s switching from royalty licensing to fixed-fee licensing. It also proves that social welfare remains unchanged by the elimination of double-marginali-zation when the innovation size is large. Finally, the paper is extended by taking into account a two-part tariff. |
| File Format | |
| Access Restriction | Open |
| Subject Keyword | Double Marginalization Upstream Firm Patent Licensing Vertically-related Market Social Welfare Monopoly Power Outsider Patentee Innovation Size Outsider Patentee Prefers Royalty Input Price Two-part Tariff Fixed-fee Licensing Out-sider Patentee Optimal Licensing Contract Three-stage Model Marginal Cost Monopoly Input Price |
| Content Type | Text |
| Resource Type | Article |
