I am most grateful to thank Derek J. Clark, Jan Yngve Sand and an anonymous referee for helpful comments and suggestions. I also thank Anita Michalsen for interesting discussions.
Licensing to a More Efficient Rival
Article first published online: 29 JUL 2013
© 2013 The University of Manchester and John Wiley & Sons Ltd
The Manchester School
Volume 82, Issue 6, pages 653–676, December 2014
How to Cite
Anderson, F. (2014), Licensing to a More Efficient Rival. The Manchester School, 82: 653–676. doi: 10.1111/manc.12036
- Issue published online: 22 OCT 2014
- Article first published online: 29 JUL 2013
- Manuscript Accepted: 24 MAY 2013
- Manuscript Received: 28 NOV 2011
This paper studies licensing of a cost-reducing innovation in an environment with horizontal product differentiation where the licensee is the most efficient firm in absence of the innovation. We derive the optimal two-part tariff and show that when we allow for negative royalty rates, the optimal contract may involve the patentee paying its rival a per-unit subsidy.