Monday, June 27, 2016
Uday Bhanu Sinha (Departments of Economics, Delhi School of Economics, University of Delhi, India) theorizes as to the OPTIMAL VALUE OF A PATENT IN AN ASYMMETRIC COURNOT DUOPOLY MARKET.
ABSTRACT: We consider a mechanism for optimizing the value of a patent owned by an independent patent holder who is not a producer in the market. We consider two kinds of cost reducing innovations: “common innovation” and “new technology innovation” in a homogeneous good Cournot market with ex-ante asymmetric costs of production. We show that the value of the patent is maximized when the patent holder sells the patent to the efficient firm at a fixed payment who would further license the innovation to its rival. This patent sale dominates all other licensing mechanisms for both kinds of innovations.