License Auctions With Royalty Contracts for (Winners and) Losers

19 Pages Posted: 28 Feb 2006 Last revised: 29 Oct 2017

See all articles by Thomas Giebe

Thomas Giebe

Linnaeus University - Department of Economics and Statistics

Elmar Wolfstetter

Humboldt University of Berlin - Faculty of Economics; Korea University - College of Economics and Commerce; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: April 1, 2007

Abstract

This paper revisits the licensing of a non--drastic process innovation by an outside innovator to a Cournot oligopoly. We propose a new mechanism that combines a restrictive license auction with royalty licensing. This mechanism is more profitable than standard license auctions, auctioning royalty contracts, fixed--fee licensing, pure royalty licensing, and two-part tariffs. The key features are that royalty contracts are auctioned and that losers of the auction are granted the option to sign a royalty contract. Remarkably, combining royalties for winners and losers makes the integer constraint concerning the number of licenses irrelevant.

Keywords: Licensing, Auctions, Royalty, Innovation, R&D, Mechanism Design

JEL Classification: D21, D43, D44, D45

Suggested Citation

Giebe, Thomas and Wolfstetter, Elmar G., License Auctions With Royalty Contracts for (Winners and) Losers (April 1, 2007). Games and Economic Behavior, Vol. 63, 2008. Available at SSRN: https://ssrn.com/abstract=885286 or http://dx.doi.org/10.2139/ssrn.885286

Thomas Giebe (Contact Author)

Linnaeus University - Department of Economics and Statistics ( email )

Växjö, 351 06
Sweden

Elmar G. Wolfstetter

Humboldt University of Berlin - Faculty of Economics ( email )

Institut für Wirtschaftstheorie I
Spandauer Strasse 1
Berlin
Germany
+49 30 2093 5652/3 (Phone)
+49 30 2093 5619 (Fax)

HOME PAGE: http://www2.hu-berlin.de/wt1wo/staff/wolfstetter/index.html

Korea University - College of Economics and Commerce ( email )

Anam-dong, Sungbuk-Ku
Seoul, 136-701
Korea

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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