Case Study about Licensing under Bargaining
Abstract: To relax the assumption that licensees have no bargaining power, which is prevalent in the licensing literature, the Rubinstein bargaining model is integrated with a duopoly licensing model in this paper. The licensor always licenses the best technology regardless of whether the technology advances are negotiated or solely determined by the licensor. Further, royalties prove to be the only payment method. Otherwise, the choice of the payment methods depends on the licensor’s market entry decision and firms’ bargaining powers in some cases.
Introduction: Innovation plays an essential role in economic development (Schumpeter, 1934). The institution of intellectual property is necessary to encourage innovation. Licensing is a popular way of acquiring existing technology, and licensing has become an important topic in the field of industrial organization since Arrow (1962). Payment methods, advances in licensed technology, and the market entry decisions under licensing, all considered in this paper, are important issues discussed in the literature. Keep reading..









