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Licensing a new product with non-linear contracts

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Abstract. 

This paper looks at a situation where a licensor owns a patent on a technology that allows the production of a new good. The licensor seeks to license its innovation to a set of producers that differ according to their marginal cost of producing an existing good. We show that the licensor is able to obtain the profit a monopolist would achieve by producing the new good. The equilibrium licensing contract specifies both a fixed fee and a royalty scheme based on the production of a licensee.
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Keywords: D45

Document Type: Research Article

Affiliations: 1: Economic Policy and Enforcement Branch, Competition Bureau 2: Département de science économique, Université de Montréal

Publication date: 2006-08-01

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