Premium
Optimal Two‐part Tariff Licensing Mechanisms
Author(s) -
San Martín Marta,
Saracho Ana I.
Publication year - 2015
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12059
Subject(s) - duopoly , tariff , product differentiation , economics , microeconomics , payment , product (mathematics) , ad valorem tax , unit (ring theory) , welfare , industrial organization , international economics , public economics , market economy , double taxation , cournot competition , geometry , mathematics , mathematics education , finance
This paper studies the optimal two‐part tariff licensing contract for an internal patentee in a differentiated C ournot duopoly. We find that the type of the royalty payment, whether ad valorem or per‐unit, that it is optimal for the patentee depends on the kind of goods produced in the industry, more precisely on whether they are substitutes or complements and on the degree of product differentiation. We also find that licensing always increases social welfare, although it may hurt consumers.