Negative royalty in duopoly and definition of license fee: general demand and cost functions

Masahiko Hattori () and Yasuhito Tanaka

MPRA Paper from University Library of Munich, Germany

Abstract: We examine the relationship between the definition of license fee and a possibility of negative royalty in a duopoly with an outside innovator which has an option to enter the market and imposes a combination of a royalty per output and a fixed fee under general demand and cost functions. We consider two scenarios about determination of license fee. One is a scenario which does not assume entry of the innovator, and the other is a scenario which takes a possibility of entry of the innovator into the market. We will show that the optimal royalty rate for the innovator in the former case is smaller than that in the latter case, and the sign of the optimal royalty rate depends on whether the goods of firms are strategic substitutes or strategic complements.

Keywords: negative royalty; duopoly; general demand and cost functions (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2017-05-07
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Related works:
Journal Article: Negative Royalty in Duopoly and Definition of License Fee: General Demand and Cost Functions (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:79000

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