Ad Valorem Versus Per‐unit Royalty Licensing in a Cournot Duopoly Model

Hsu, Judy; Liu, Longhua; Wang, X. Henry; Zeng, Chenhang

doi:10.1111/manc.12280

Cited by 17 publications

(15 citation statements)

References 30 publications

(46 reference statements)

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“…The results of this article show that product differentiation and cost have important impacts on technology licensing and innovation behavior, which is consistent with existing research (e.g., Yan & Yang, 2018;Badia, 2019;Hsu, 2019). This paper considers the case in which the follower is the innovative enterprise, which contributes to the existing literature.…”

Section: Discussionsupporting

confidence: 88%

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Technology Sharing and Competitiveness in a Stackelberg Model

Chen¹,

Wei²,

Liu³

et al. 2021

JOC

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The existing literature has made great achievements in technology sharing (licensing patents) contracts, which has defects in the selection of oligopoly models, the setting of innovation subjects, the consideration of product heterogeneity, and production costs. This paper aims to reveal the competitiveness strategies of leaders and followers for innovation, technology sharing, and sharing fees in a Stackelberg market. The three-stage sequential game method is used to achieve the objective. The results are as follows. First, whether an enterprise uses innovation or shares technology is related to the fixed cost of innovation, the return on innovation, and product differentiation. It will hinder innovation activities if the fixed cost of innovation is too high, the return on innovation is too low, or the products are too homogeneous. A relatively low return on innovation makes it possible for the two enterprises to engage in sharing. However, with a relatively high return on innovation, only a high level of product differentiation can ensure technology sharing. Second, the optimal sharing fee is dynamic, showing an upward and then downward trend as the return on innovation grows. Product differentiation has an uncertain impact on the cost. Third, either the leader or the follower is likely to be the optimal bearer of social responsibility depending on the returns on innovation and product differentiation. This study has theoretical significance for optimizing technology-sharing decisions, improving competitiveness for enterprises, and formulating effective industrial policy for the government. And it provides some practical guidance for competition and cooperation between enterprises with technological innovation behavior.

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Section: Discussionsupporting

confidence: 88%

“…Zhang et al (2018) find that royalty licensing is optimal when the network effect is low. Hsu et al (2019) find that ad valorem royalty licensing is superior to per-unit royalty licensing for the supplier if cost-reducing innovation is non-drastic. From the above literature, it is suitable to use a royalty contract for our model.…”

Section: Theoretical Backgroundmentioning

confidence: 88%

Technology Sharing and Competitiveness in a Stackelberg Model

Chen¹,

Wei²,

Liu³

et al. 2021

JOC

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“…Under an ad valorem profit royalty policy, a licensee pays a specified proportion of its profit to the innovator. Real world examples of profit‐sharing include agreements between Motorola and Universal Display Corporation in 2000, CSIRO and PolyNovo in 2005, and Microsoft and Skinkers in 2006 (see Hsu et al, 2019; Niu, 2017; San Martín & Saracho, 2010; Vishwasrao, 2007).…”

Section: Introductionmentioning

confidence: 99%

Equivalence between fixed fee and ad valorem profit royalty

Colombo

Sen

et al. 2021

J Public Economic Theory

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For an outside innovator with a finite number of buyers of the innovation, this paper compares two licensing schemes: (i) fixed fee, in which a licensee pays a fee to the innovator and (ii) ad valorem profit royalty, in which a licensee leaves a fraction of its profit with the innovator. We show these two schemes are equivalent in that for any number of licenses the innovator puts for sale, these two schemes give the same licensing revenue. We obtain this equivalence result in a general model with minimal structure. It is then applied in a Cournot oligopoly for an outside innovator. Finally, in a Cournot duopoly it is shown that when the innovator is one of the incumbent firms rather than an outsider, the equivalence result does not hold. * We are grateful to the editor Rabah Amir and two anonymous reviewers for their helpful comments and suggestions.

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“…ere are many types of games, such as the Cournot game [1][2][3][4][5][6][7], the Bertrand game [8][9][10][11][12][13][14], the Stackelberg game [15][16][17], the evolutionary game [18], and the mixed game [19]. Many researchers have studied duopoly games with some interesting characteristics, such as bounded rationality [1,[15][16][17], technology licensing [3,20], and R&D [6,13]. Table 1 shows some recent research studies on duopoly games with integer-order difference equations.…”

Section: Introductionmentioning

confidence: 99%

A Bertrand Duopoly Game with Long-Memory Effects

et al. 2020

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Reconsidering the Bertrand duopoly game based on the concept of long short-term memory, we construct a fractional-order Bertrand duopoly game by extending the integer-order game to its corresponding fractional-order form. We build such a Bertrand duopoly game, in which both players can make their decisions with long-memory effects. Then, we investigate its Nash equilibria, local stability, and numerical solutions. Using the bifurcation diagram, the phase portrait, time series, and the 0-1 test for chaos, we numerically validate these results and illustrate its complex phenomena, such as bifurcation and chaos.

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Ad Valorem Versus Per‐unit Royalty Licensing in a Cournot Duopoly Model

Cited by 17 publications

References 30 publications

Technology Sharing and Competitiveness in a Stackelberg Model

Technology Sharing and Competitiveness in a Stackelberg Model

Equivalence between fixed fee and ad valorem profit royalty

A Bertrand Duopoly Game with Long-Memory Effects

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