Optimal Licensing of Agricultural Patents: Fees Versus Royalties

Author

Di Fang, Timothy Richards and Bradley Rickard

Journal of Agricultural and Resource Economics, 2015, vol. 40, issue 1

Abstract: We develop a theoretical model of optimal licensing schemes for quality-improving innovations. We consider an oligopolistic market where two downstream firms compete in price and the upstream innovator holds a technology that may create differentiation between the products. Our results show that non-exclusive licensing performs better than exclusive licensing under both fixed fees and royalties and that the preferred contract consists of fixed fees only. We also find that the innovator’s license revenue depends on the magnitude of the innovation so there is a greater reward to the innovator’s institution if the innovation is large.

Keywords: agricultural innovation; horticulture; licensing; patents; price competition; royalties; Agribusiness; Agricultural and Food Policy (search for similar items in EconPapers)
Date: 2015
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